The more local stablecoins there are, the harder it is to replace US dollar stablecoins. Instead, the dollar stablecoin is more likely to become the settlement layer for the whole on-chain payment system.
This sounds counterintuitive, but the logic is not complicated: local stablecoins solve the "last-mile landing" problem, but their mutual recognition and liquidity are far less mature than US dollar stablecoins. In an August 2026 analysis, the International Monetary Fund noted that the spread of local stablecoins may actually increase demand for US dollar stablecoins. When two stablecoins circulate on the same chain, users tend to choose the one with better liquidity and stronger network effects as the exchange bridge.
Concept breakdown: what local stablecoins solve and what they cannot solve
Local stablecoins solve the problem that the payer and payee ultimately need local currency.
A Brazilian supplier that receives USDC eventually needs to convert it into Brazilian real to pay wages and taxes. A European employee who receives USDC eventually needs euros to pay rent. The value of local stablecoins is moving this "last-step" exchange earlier in the process.
The "stablecoin sundae" model works like this: the payer converts local currency into a local stablecoin, exchanges it directly on-chain into the payee's local stablecoin, and then converts that into the payee's local currency. The only foreign exchange conversion happens between on-chain stablecoins, and the cost is much lower than the multiple markups in traditional cross-border payments.
But local stablecoins cannot solve the problem of fragmented liquidity.
According to statistics from July 2026, there are about 80 active local stablecoins in the market, with a total market cap of about $3.6 billion. They are spread across Europe (30), Asia (18), Latin America (16), and Africa (5). Compared with the roughly $3 trillion market cap of US dollar stablecoins, the total size of local stablecoins is only a tiny fraction. The market cap of euro stablecoins grew 128% in a year, but they still account for only 0.22% of the global stablecoin market.
Why US dollar stablecoins are still hard to avoid
First, liquidity depth is overwhelming. $3 trillion versus $3.6 billion is not the same league. If you want to exchange a Brazilian real stablecoin for a Singapore dollar stablecoin, there may not be enough liquidity pools to support a direct swap. In the end, you still have to go through USDC or USDT.
Second, network effects. US dollar stablecoins are already embedded in the entire crypto ecosystem. Exchanges, wallets, DeFi protocols, and payment service providers all use them as core settlement tools. Local stablecoins are currently scattered nodes, while dollar stablecoins are the backbone network connecting those nodes.
Third, cross-border settlement infrastructure is already anchored to US dollar stablecoins. Visa's stablecoin settlement pilot supports both USDC and EURC, but as of September 2025, the $225 million in settled volume is still in the testing stage compared with Visa's $16 trillion annual payment volume. Mastercard has also launched on-chain settlement supporting multiple stablecoins, but the standardized settlement layer is still mainly based on US dollar stablecoins.
Regulatory attitudes: local stablecoins are politically correct, but the dollar's network effect has practical advantages
Europe is promoting euro stablecoins. A European Parliament report explicitly encourages the development of euro-denominated stablecoins to support the EU payments industry. But the European Blockchain Association report admits that under the MiCA framework, stablecoin payments are not allowed to earn interest, and the 30%-60% bank deposit reserve requirement makes euro stablecoins commercially uncompetitive compared with US dollar stablecoins.
Singapore is promoting the Singapore dollar stablecoin XSGD, aiming to "break the long-standing on-chain foreign exchange barrier dominated by the US dollar." But the issuer behind StraitsX also knows that for XSGD to truly enter mainstream payment scenarios, it still needs to be connected with USDC and USDT.
Practical advice: how to use local stablecoins and US dollar stablecoins together
If both the payer and payee are within the same local stablecoin coverage (for example, both in Singapore receiving XSGD), settle directly in the local stablecoin to skip the dollar conversion step.
If you are making a cross-border payment (for example, from Brazil to Singapore), the best route is still: local stablecoin → USDC/USDT → target local stablecoin. Treat US dollar stablecoins as the settlement layer and local stablecoins as the landing layer.
Check whether your payment service provider supports the "stablecoin sundae" model. If it supports direct on-chain exchange of local stablecoins, you can save one round of fiat deposit and withdrawal fees.
Verification checklist
Next time a supplier asks, "Can you pay directly in a local currency stablecoin?", confirm three things before answering:
The supplier's stablecoin issuer and chain are compatible with yours. The same stablecoin on different chains is not interoperable.
The local stablecoin's trading depth and liquidity pools are large enough to support your payment amount.
If you use a direct local stablecoin route, check whether the actual arrival time and cost are truly better than "USDC transfer plus local cash-out."
Verification channel: Check the depth of the local stablecoin trading pair you plan to use on a decentralized exchange (DEX) or liquidity aggregator. If a medium-sized payment can eat up more than 1% of the pool depth, slippage will eat away your cost advantage. In that case, going through USDC as an intermediary is actually cheaper.
