Euro stablecoins have entered DeFi. What are other local currencies waiting for?

Author: Prathik Desai / The Token Dispatch

Compiler: ShenChao TechFlow

ShenChao Introduction: This article clarifies a commonly misunderstood issue with data: non-USD stablecoins are not monolithic; euro stablecoins and other local currency stablecoins are taking entirely different paths.

EURT was directly killed by the MiCA regulations, but this has instead forced the entire market to rebuild—supply has nearly tripled so far in 2023.

A more critical finding is that 90% of non-USD transfer volume is contributed by euro stablecoins, while other local currencies are currently used almost exclusively for payment settlements; DeFi integration is the next stage, not the present.

The full text is as follows:

Money is only truly useful when it reaches its destination. Wages earned overseas must pass through banks, foreign exchange counters, payment partners, and local compliance checks before they can pay for rent, tuition, utilities, and food back home. Before that, it is merely value in motion, not a medium of exchange.

The same issue now appears on-chain. Stablecoins move funds globally via code, but their utility depends on where they can be accessed, who is allowed to use them, and what rules govern their reserves and redemptions.

When I researched Dune’s report “Beyond Dollarization: The Rise of Local Currency Stablecoins,” this concept left a deep impression on me.

In today’s quantitative analysis, I will explain the factors influencing the growth of non-USD local currency pegged stablecoins.

The Teeth of Regulation

The clearest case of regulatory impact occurred with the Tether euro-pegged stablecoin. The European MiCA (Markets in Crypto-Assets) regulation officially takes effect in 2024, almost immediately sentencing euro Tether (EURT) to death.

EURT was one of the earliest and largest non-USD stablecoins, with its circulating supply crashing from over $400 million to around $50 million. Consequently, the total supply of local currency stablecoins dropped from $1 billion to $350 million.

Crypto enthusiasts often assume that the code itself is sufficient. They create a token, inject liquidity, and then expect the market to take care of the rest. But non-USD stablecoins are not just abstract internet currencies. They aim to be better digital versions of local currencies like the euro, yen, and baht, capable of flowing on public rails without being constrained by bank operating hours. However, they operate within domestic financial systems and are subject to reserve requirements, licensing regulations, payment networks, and redemption expectations.

The closure of EURT reminds us that having a first-mover advantage and scale is not enough. A single change in the domestic rulebook can erase all the advantages of a first mover.

However, regulation is not entirely detrimental to stablecoins. If it were, non-USD stablecoins might have stagnated after the exit of EURT.

Excluding EURT, the total supply of non-USD stablecoins grew from about $350 million in January 2023 to $1.1 billion in February 2026, nearly tripling.

The Market is Expanding

As supply increases, the number of addresses holding such stablecoins grew from about 42,000 to over 1.2 million during the same period.

Monthly transfer volume surged from $600 million to $10 billion, a 16-fold increase. The number of monthly sending addresses grew 22 times, from about 6,000 to 135,000.

The growth rates of holders and senders outpaced the growth rate of supply, indicating that the market is expanding through increased participation.

Thus, regulation is not always harmful to the market as it was with euro Tether; here, it has instead attracted more stablecoin issuers and users.

Where Non-USD Funds Are Flowing

By early 2026, unidentified transfers accounted for 38% of total transfer activity in local currency stablecoins. This likely reflects payment and settlement activities, including peer-to-peer transfers and transfers from self-custodied wallets to payment service providers.

Next is lending, accounting for 29%; DEX activities make up 17%; and centralized exchange-related liquidity accounts for 14%.

This classification shows that non-USD stablecoins are primarily used for two types of scenarios on-chain: one is for payments or as funds flowing between individuals or businesses; the other is for foundational DeFi operations such as lending and trading.

However, there is a caveat in the data. If euro-pegged stablecoins are stripped from the data, the market would show a dramatically different trend.

Euro stablecoins account for over 90% of total transfer volume and are being used as financial assets themselves. Users deposit them into lending markets, utilize them on DEXs, and increasingly treat them as on-chain cash that can earn yields, serve as collateral, and circulate within DeFi. This makes local currency stablecoins appear more mature.

EURC, along with EURS, EURm, and EUROe, has already entered DeFi yield-generating venues like Aave, Morpho, and Fluid.

Once euro stablecoins are excluded, the remaining non-USD digital currencies are mainly used for settlement infrastructure.

Nearly 80% of non-USD, non-euro stablecoin transfers fall into the unidentified transfer category. This likely encompasses wallet transfer of funds, corporate settlement of debts, remittance-style transfers, and payment flows circulating through service providers.

The dominance of euro-pegged currencies among non-USD stablecoins indicates that the next phase of growth is more likely to concentrate on foundational DeFi operations. Beyond the euro, non-USD stablecoins will first expand as infrastructure for domestic funds flowing on digital rails before they can be used for foundational DeFi operations.

This growth is crucial as it will come from stablecoins used for payroll, fund management, merchant settlements, remittances, and foreign exchange (FX).

These areas are subject to more regulation than foundational DeFi operations, as operational funds have far less tolerance for ambiguity than speculative assets. If a token is expected to operate within a domestic payment system, financial workflows, and an environment with strict compliance requirements, it will need predictable reserves, clear redemption processes, and legal clarity. Therefore, regulation will play a key role in the adoption of non-USD stablecoins.

This also explains why growth is concentrated in regions with mature financial systems. The report notes that the activity of the Brazilian real (BRL) and the Japanese yen (JPY) accelerated after local regulatory frameworks improved; whereas markets like Indonesia, lacking dedicated regulatory systems, lagged behind.

I also discovered the economic rationale for non-USD stablecoins.

Cross-border payments still bear high exchange costs, with remittances losing a significant portion in foreign exchange spreads and intermediary steps. More local currency stablecoins can reduce the amount of value that needs to pass through the dollar before reaching its destination. This can lower forex costs, eliminate settlement friction, and allow businesses and individuals to hold value in the currency they earn, consume, and save.

Its potential far exceeds DeFi itself. Euro stablecoins have already set a strong precedent for integrating local digital currencies into the financial system. However, lowering the costs and speed of cross-border capital movements globally, and reducing reliance on the dollar, will be a greater victory.

Issuers that can make it easier to send, settle, and embed local currencies into existing payment infrastructure will benefit from the immense potential of non-USD stablecoins. If they can create favorable conditions for better adoption, DeFi integration will naturally follow.