Stablecoins – How will they impact financial centers?

Published by the Asian Financial Coorporation Association (AFCA)

Stablecoins are not a passing fad but a foundational component of the evolving digital financial landscape. The paper examines how stablecoins will reshape the competitive landscape for financial centers worldwide.

There are three broad forms of digital money that are likely to co-exist in the future: Central Bank Digital Currencies (CBDCs), tokenized deposits issued by commercial banks, and regulated stablecoins issued by private entities. Each has different risk profiles, governance structures, and use cases — and financial centers will need to develop clear frameworks for all three.

The key thesis is that stablecoins will increasingly enable financial transactions to bypass traditional correspondent banking infrastructure, creating both risks and opportunities for financial centers that depend on transaction volumes, foreign exchange operations, and the provision of regulated payment services. This disintermediation pressure will be felt first in cross-border payments and trade finance, but is likely to extend progressively into retail finance and securities settlement.

The paper argues for a multi-polar future for digital currencies — where multiple reserve currencies and regional currencies each have their stablecoin representations, and where the current USD dominance in stablecoins gradually gives way to a more diverse landscape reflecting the multipolar nature of the global economy.

Financial centers that move early to establish robust regulatory frameworks for stablecoins — prioritizing transparency in reserve management, strong consumer protection mechanisms, and interoperability with existing payment rails — are likely to attract the most sophisticated operators and the highest-quality transaction flows. This is not primarily a technology challenge but a governance and regulatory design challenge. The paper concludes with a set of practical policy recommendations for financial center operators at various stages of regulatory development.