How Emerging Markets Can Use Blockchain Payments Without Losing Financial Stability

By Sofi Håkanson, Chief Growth Officer, Centiglobe

Blockchain-based payments are moving rapidly into the financial mainstream, largely driven by recent regulatory developments such as MiCA in Europe and the GENIUS Act in the United States. For many countries, the technology promises faster cross-border payments, lower costs, and more efficient global trade.

For emerging market economies, however, this innovation also creates a difficult policy and market infrastructure dilemma.

In practice, the question is not only about payments innovation. It is about what settlement assets and controls sit underneath cross-border flows, and how countries can modernise rails without weakening monetary sovereignty, FX stability, or regulatory visibility. The Emerging Markets Policy Dilemma

Most blockchain-based payment models today are built around USD-denominated stablecoins, allowing individuals and businesses to move funds across borders instantly, often outside the traditional banking system.

While this can improve financial access and efficiency, it also creates risks for countries with fragile currencies or limited hard currency reserves. If stablecoins become widely used for savings or transactions, economies may face accelerated capital flight, pressure on foreign exchange reserves, and even involuntary dollarization.

At the same time, stablecoins operating outside the traditional financial system can make it harder for authorities to monitor financial flows and prevent illicit transactions. Simply banning or restricting them may reduce these risks, but it does not change the underlying shift toward instant, token-based payments.

For emerging markets, the challenge is therefore not whether blockchain-based payments will shape the future of finance, but how to adopt the benefits of the technology without losing control of monetary systems and maintaining financial stability. And there is a path that combines the advantages of token-based payments infrastructures with the controls of the traditional financial system.

Emerging markets need faster, lower-cost cross-border payments, but they also need to preserve monetary sovereignty, foreign exchange stability, and regulatory visibility. The challenge is capturing the benefits of blockchain-based payments without weakening control over the domestic financial system.

The Emerging Market Dilemma of Involuntary Dollarization

In many emerging economies, banking systems can be fragile and access to hard currency reserves is limited. Historically, individuals have often held savings in U.S. dollars in cash to protect themselves from volatile local currencies.

Stablecoins make this significantly easier.

Instead of storing physical USD, individuals can now hold USD-denominated stablecoins on their phones and move them across borders instantly. In times of economic distress, this can accelerate capital flight and increase pressure on already fragile balance-of-payments positions.

The issue goes beyond capital outflows. Because most stablecoins are denominated in U.S. dollars, widespread use risks leading to involuntary dollarization. If individuals and businesses begin transacting in USD stablecoins instead of local currency, domestic monetary policy tools become less effective.

In practice, economic stability may become increasingly tied to the monetary policy of the U.S. Federal Reserve rather than the country’s own central bank. This is not a desirable outcome.

Why Some Countries Are Restricting Stablecoins

Given these risks, some emerging market regulators have taken steps to restrict or limit USD-based stablecoins.

From a central bank perspective, the concern is not the technology itself. The issue is losing control of the monetary system and financial flows.

At the same time, blockchain technology offers important advantages for payments:

• Faster settlement

• Lower transaction costs

• Greater transparency

• Reduced reliance on correspondent banking chains

The challenge is how to capture these benefits without compromising monetary sovereignty or regulatory oversight.

The opportunity is not to choose between legacy rails and open stablecoin ecosystems. It is to build a blockchain-based payment infrastructure that combines token-based settlement efficiency within the existing regulated financial controls.

A Third Path: Network-Based Tokenized Deposit Networks

There is, however, another approach. A third path where both the benefits of these new payment technologies can be reaped but without risking the “dollarization” which might occur with Stablecoins.

One alternative is network-based tokenized deposit networks, where regulated financial institutions move value between each other using blockchain technology.

In this model, tokenized deposits represent digital representations of bank deposits issued by regulated financial institutions, designed to operate across shared infrastructure rather than within a single bank.

The concept can be described as network-based tokenized deposits: bank-agnostic tokenized deposits interoperable across multiple institutions on shared infrastructure.

Within such a network, tokenized deposits circulate between regulated financial institutions in a permissioned environment, ensuring transactions remain subject to the same frameworks that already govern cross-border payments, including:

• Regulatory supervision

• AML and compliance controls

• Existing capital controls

This allows countries to modernise payment infrastructure without weakening the safeguards already built into the financial system.

A third path: network-based tokenized deposits that bring blockchain efficiency to cross-border payments while remaining within the regulated financial system.

How Network-Based Tokenized Deposits Differ

As mentioned, there are three main token-based settlement models emerging for cross-border payments: stablecoins, single-bank tokenized deposits, and network-based tokenized deposits.

But how do they work more in detail? While all three use blockchain technology, they differ significantly in governance and financial structure:

Stablecoins

Typically issued by private companies as reserve-backed digital tokens. They circulate freely in open digital ecosystems and can move across borders outside the traditional banking framework.

Single-bank tokenized deposits

Represent deposits issued and tokenized by a specific bank and typically operate within that bank’s ecosystem, enabling faster settlement between the bank and its clients.

Network-based tokenized deposits

Enable value transfer between multiple regulated financial institutions through a shared payment network. Rather than being tied to a single bank, they function as bank-agnostic tokens that move between participating institutions.

In practice, cross-border payment flows may combine elements from the models, using stablecoins and tokenized deposits in complementary roles.

The Role of Networks Like Centiglobe

Networks such as Centiglobe Connect apply the network-based tokenized deposits model to cross-border payments by enabling financial institutions to transact using bank-agnostic tokenized deposits interoperable across multiple institutions on shared infrastructure.

How Network-Based Tokenized Deposits Work

1. Regulated institutions deposit funds which are tokenized as deposits. These tokenized deposits are used for cross-border value transfers.

2. Value moves across shared infrastructure. Transactions take place between participating institutions on a permissioned network.

3. Oversight remains inside the regulated system. Efficiency improves without moving payments outside existing compliance and supervisory frameworks.

4. The tokenized deposits are bank-agnostic. Tokens can move outside the ecosystem of the bank where the deposits are held, across participating institutions.

Participating banks and payment providers can transfer value instantly while remaining integrated with existing regulatory and compliance frameworks.

This allows institutions to capture the efficiency benefits demonstrated by blockchain-based payment technologies, similar to those seen in stablecoin ecosystems, without moving transactions outside the regulated financial system.

For emerging markets, this approach offers a way to modernise cross-border payment infrastructure while preserving monetary sovereignty and regulatory oversight.

Innovation Without Losing Monetary Sovereignty

For emerging markets, blockchain technology is already reshaping global payments. The key question is how to adopt these innovations in a way that strengthens rather than weakens financial systems.

Network-based tokenized deposit payment infrastructures provide one possible path forward. By combining the efficiency of blockchain technology with the safeguards of the regulated banking system, countries can modernise cross-border payments without exposing their economies to uncontrolled dollarization or capital flight.

In other words, the benefits of blockchain-based payments can be realised while maintaining control over national currencies and financial stability.

Key takeaways for emerging markets

• Stablecoins can improve payment efficiency, but may increase monetary risks in emerging markets.

• Network-based tokenized deposits offer a more controlled model for modernising cross-border payments.

• The strategic question is not whether to adopt blockchain-based payments, but how to do so without losing regulatory control.