Global Inflation Is Rising: How Stable Coins Help Protect Savings


Economies around the world are facing a host of challenges caused by rising inflation. High inflation devalues ​​national currencies, which in turn drives up the cost of living, especially in scenarios where incomes remain unchanged.

In the United States, the government reacted strongly to inflation. The country hit an inflation rate of 9.1% in June, prompting the Federal Reserve to implement a series of fiscal countermeasures designed to prevent the economy from overheating. Rising interest rates were one of them.

The Fed’s hike in interest rates has consequently slowed consumer spending and business growth in the country.

The anti-inflationary approach has also boosted the value of the US dollar against other currencies due to tight controls on dollar liquidity. As 79.5% of all international trade is conducted using the dollar, many countries are now paying a premium for imports to compensate for the rise in the value of the dollar, which is worsening inflation in these importing countries.

Subsequently, citizens of some struggling economies have started converting their money into more stable foreign currencies to protect their money from depreciating in value, and many of them are turning to stablecoins to achieve this.

Whitney Setiawan, research analyst at crypto exchange Bitrue, told Cointelegraph, “With the US dollar seeing strong appreciation against other fiat currencies, most crypto-savvy users have a vested interest in holding coins. stable”.

Setiawan also predicted that the stablecoin industry is likely to disrupt the remittance industry in the near future due to the multitude of benefits offered by stablecoins.

“With interest in stablecoins being fueled by a variety of factors, I can predict that it will only be a matter of time before this asset class knocks the remittance industry down by a significant margin,” he said. she declared.

On that last point, remittance companies have indeed taken note and have in recent months taken steps to claim a share of the stablecoin market. MoneyGram, for example, recently partnered with Stellar to offer stable money transfer services on its network.

What are stablecoins?

A stablecoin is a digital currency whose value is often pegged to an asset or regulated by an algorithm to maintain a stable value.

Collateralized stablecoins are the most popular and are backed by reserves of their underlying assets. In most cases, their value follows that of popular national currencies such as the US dollar, British pound or Euro.

This category of stablecoins is widely used by crypto traders looking to avoid upheavals in the crypto market and users looking to hedge their money against inflation.

Other types of stablecoins include commodity-backed, crypto, and algorithmic stablecoins.

Why stablecoins are ideal as instruments against inflation

Stablecoins are ideal as instruments against inflation for many reasons. One of them is their immutable and borderless nature.

The decentralized nature of the blockchain technology that stablecoins operate on allows them to cross borders that might otherwise be closed to cross-border financial activity.

Stablecoin transactions are also fast and cost effective compared to remittances made through commercial banking networks. This makes them convenient for people who want to send and receive money and hedge against inflation.

Another disruptive property that stablecoins possess is their ability to cater to the needs of the unbanked. Around 2 billion people in the world today do not have a bank account. Stablecoins have demonstrated their ability to reach this marginalized demographic by allowing anyone with a device that can host a digital wallet, such as a smartphone or laptop, to use stablecoins.

In some developing countries, many people do not have the necessary documents to open a bank account and are therefore excluded from the main financial systems of their country. Using stablecoins allows this group of users to send and receive money easily and use their monetary assets to hedge against inflation when the need arises.

Brian Pasfield, CTO of Fringe Finance – a crypto lending platform that provides lending opportunities for stablecoin holders – told Cointelegraph:

“Banks have tight monetary policies that generally reduce the supply of dollars. This trend makes stablecoins an attractive option for those looking to access the value of USD, as they are generally accessible with few barriers to entry.

He also pointed out that governments have the ultimate power when it comes to the widespread adoption of stablecoins.

“The likelihood of them (stablecoins) becoming mainstream and therefore disruptive is in the hands of governments themselves, who may seek to implement their own solutions or censor existing avenues,” he said. .

While governments have been slow to adopt official stablecoin policies, or may even undermine private stablecoins with the advent of central bank digital currencies, there are several countries where citizens have taken matters into their own hands. hand using stablecoins to protect their savings.


Venezuela has experienced an average inflation rate of around 3,711% since 1973. The bolivar has lost its value so much over the past four decades that it has had to be reconverted several times. To put it into perspective, the country had to remove 14 zeros from its currency over the past 14 years to simplify the monetary scale.

Since the Venezuelan bolivar is volatile and its value fluctuates throughout the day, it is common for traders to quote prices for goods and services in US dollars. Customers who do not have dollars must generally pay in bolivars, but at the current exchange rate against the dollar.

That said, dollar bills can sometimes be in short supply, and that gap is currently being filled by stablecoins. With an internet penetration of around 72% according to 2020 statistics, online payment companies supporting the use of stablecoins have already started to settle in the country.

Companies include Reserve, a Coinbase-backed startup. His app is now widely used in Venezuela to buy and sell stablecoins.

Even the US government has joined the stablecoin foray and is increasingly using Circle’s USD Coin (USDC) stablecoin to circumvent corrupt government institutions when delivering aid to Venezuelan citizens.


Earlier this month, Turkey’s annual inflation rate hit 80%, with the Turkish lira losing around 27% of its value against the US dollar so far this year. In 2021, the lira lost 44% of its value against the greenback. Its steep decline has led to a surge in demand for stablecoins as people move to hedge their money against inflation.

According to data derived from CryptoCompare, the Turkish lira is the second highest fiat-to-tether (USDT) trading pair and currently accounts for around 21% of all national currency swaps. Tether is a dollar-denominated stablecoin backed by a basket of different assets.

The lira is also the second most traded Binance USD (BUSD) stablecoin pair and is used in around 5.2% of trades. Binance USD is the dollar-denominated stablecoin of leading cryptocurrency exchange Binance.

The growing popularity of cryptocurrencies in the country has in the recent past raised concerns about monetary control and prompted authorities to ban the use of cryptocurrencies as a form of payment.

However, the utility of crypto is still high despite the ban.


Nigerians are starting to use stablecoins to mitigate the effects of rising inflation.

According to the latest statistics released by the country’s National Bureau of Statistics (NBS), the inflation rate in the country hit 19.64% in July, a 17-year high.

According to the BNS report, the cost of basic necessities such as food, transportation, fuel and clothing has risen sharply as a result.

The situation has been brought about by climate change, the economic aftershocks caused by the coronavirus and rising insecurity. It was further aggravated by Russia’s invasion of Ukraine, which disrupted crucial supplies from both countries. Nigeria imports more than $2 billion worth of essential goods from Russia and Ukraine every year.

Inflation issues are forcing many Nigerians to start using stablecoins to prevent the devaluation of their savings. According to data pulled from Google Trends, Nigeria ranks first among countries with significant interest in stablecoins. Research statistics indicate that the nation has the highest interest in researching Tether stablecoin in the world.

USDT is currently the most traded stablecoin.


Argentinians are increasingly turning to US dollar stablecoins to protect their money against high inflation. The country’s inflation rate is expected to reach 95% by the end of the year.

Recent developments that have heightened demand for stablecoins include the July stablecoin buying spree that was sparked by the resignation of Economy Minister Martín Guzmán.

Major crypto exchanges serving Argentine citizens saw a surge in stablecoin sales following the announcement, with purchases surging by more than 200%.

The news also caused the value of the Argentine peso to fall by around 15%.

Today, Argentinian merchants quote prices in dollars for high-value items due to the high volatility affecting the national currency. The Argentine peso has lost more than 30% of its value since the start of the year.

The prevailing US dollar trade restrictions have also helped increase the demand for stablecoins.

Roadblocks for stablecoins

There are many limitations that prevent the widespread use of stablecoins as an inflation hedge. One is the changing regulatory landscape that threatens to block their use in some jurisdictions. The European Union, for example, is looking to ban the use of dollar-pegged stablecoins in the region in the near future. Such embargoes are likely to limit the use of stablecoins as a hedge against inflation.

Additionally, most countries lack the elaborate policies needed to legitimize the crypto industry. Currently, the stablecoin industry would need extensive anti-money laundering, tax policy and fraud prevention regulations in order to truly mainstream, but many countries are unwilling to go so far because of the complexity of these processes.

This has led some countries, such as China, Algeria, and Egypt, to completely ban cryptocurrency trading.