Stablecoin holders are not waiting for banks to onboard them. They are building parallel collateral systems.

I. The thesis

Three years ago, the conventional banking response to stablecoin growth was that this would all eventually be absorbed into the regulated banking system. Customers would tire of self-custody. Yields available on-chain would compress. Regulatory clarity would push the activity onshore, into bank balance sheets, under bank supervision.

Three years on, none of that has happened. Self-custody has not declined; it has grown. On-chain yields have not compressed; they have stabilised at structurally higher levels than retail bank deposits in most jurisdictions. And the regulatory clarity that arrived — chiefly the European Union's Markets in Crypto-Assets regulation, in force since 2024 — has done the opposite of what the banking system expected. It has not pulled the activity into banks. It has legitimised the parallel infrastructure outside them.

The story being missed, while industry attention remains fixed on stablecoin issuance, is that stablecoin holders have built — and are using at scale — a parallel collateral system. They are pledging their balances against credit. They are earning yield against them. They are doing this on protocols that did not exist five years ago and at volumes that, in some categories, now exceed the equivalent flows through traditional banking channels. The credit market is forming around the diaspora and around emerging-market savers, and the financial system is, for the second time in a decade, being built around itself rather than inside it.

II. The evidence

The numbers are visible to anyone who chooses to look at them.

Aave, the largest decentralised lending protocol, holds more than twenty billion US dollars in total value locked across its multiple chains.[^1] Its borrow volume is sustained, growing, and predominantly collateralised by stablecoins. MakerDAO — recently rebranded as Sky — operates a stablecoin (DAI, now USDS) whose supply is collateralised by a basket including USDC, treasury bills via real-world asset partnerships, and other digital assets. The DAI/USDS supply has sustained levels above five billion dollars for several years, despite cyclical crypto-market drawdowns.[^2] These protocols are not theoretical. They process billions of dollars in lending activity every month, with the great majority of borrowers paying interest in stablecoins and pledging stablecoin or stablecoin-equivalent collateral.

The geography of the activity reveals what is happening. Chainalysis estimates that sub-Saharan Africa received more than two hundred and five billion dollars in on-chain value between July 2024 and June 2025, a fifty-two per cent increase over the prior year.[^3] Latin America grew sixty-three per cent. The Asia-Pacific region grew sixty-nine per cent. In sub-Saharan Africa specifically, eight per cent of transferred value moved in transactions below ten thousand dollars, compared with six per cent globally — a clear retail signal.[^4] Nigeria's institutional B2B stablecoin activity, particularly cross-border trade settlement between West Africa, the Middle East, and Asia, has expanded faster than any other category.[^5]

A second tier of infrastructure has formed alongside the consumer DeFi protocols. Centrifuge has structured more than five hundred million dollars of real-world-asset financing on-chain, primarily backed by trade receivables and short-dated credit pools.[^6] Maple Finance, after restructuring following its 2022 stress event, has restored its institutional lending platform to over three billion dollars in active loans, primarily to credit funds operating with regulated counterparties.[^7] Goldfinch, Ondo, Backed, Provenance — each of these protocols is, on its own scale, replicating one or another function of the regulated credit market, with stablecoin balances as collateral and stablecoin yields as funding.

What the banking industry has not yet absorbed is the implication of these numbers. The diaspora's stablecoin balance — the holdings that sit, today, in Nigerian wallets in Lagos, Argentine wallets in Buenos Aires, Turkish wallets in Istanbul — is already being put to work. Not in the future. Now. The credit relationships are being formed. The yield is being captured. The infrastructure is being built. The only question that remains open is whether the regulated banking system will participate in this credit market on terms that suit it, or whether it will continue to insist that the activity must come to its branch network on its terms — and find, in five years, that the market has formed entirely without it.

III. The counter

The strongest objection to this thesis is that decentralised finance protocols, however large their nominal volumes, are not credit infrastructure in any meaningful regulatory sense. They lack consumer protections. They lack supervisory oversight. They have suffered repeated and catastrophic failures — Terra, Celsius, FTX, the long list — that the regulated banking system does not face at equivalent scale. To call them a parallel credit system is, the argument goes, to dignify with the language of finance what is really gambling with extra steps.

This objection has weight. It is also missing the point.

The argument applies to the first generation of DeFi infrastructure, the period from 2018 to 2022, during which un-regulated protocols proliferated and several of them collapsed in spectacular fashion. The post-2022 environment is structurally different. MiCA, in force since 2024, requires stablecoin issuers operating in the European Union to obtain authorisation, maintain segregated reserves, and submit to ongoing supervision. Circle, the issuer of USDC, became MiCA-compliant in 2024 and now operates under the supervision of the French Autorité de Contrôle Prudentiel et de Résolution and the European Banking Authority. EURC, Circle's euro-denominated stablecoin, has grown to over seven and a half billion dollars in circulating supply.[^8] Tether has indicated plans to issue a separate MiCA-compliant variant. The institutional custodians that hold stablecoin balances on behalf of regulated funds — Swissquote Bank Europe, Sygnum Bank, Hauck Aufhäuser Lampe — are themselves supervised by FINMA or the CSSF.

The infrastructure that matters for institutional cross-border credit is not the un-regulated DeFi of 2021. It is the regulated stablecoin layer of 2025, custodied by supervised banks, used as collateral by AIFMD-licensed credit funds, with end-borrowers protected by the relevant consumer-credit frameworks of the European Union and its member states.

The objection is correct that the historical track record of DeFi is problematic. It is incorrect to extend that track record to the regulated infrastructure being built today. The parallel system is not, any more, a parallel to the regulated banking system. It is becoming part of it.

IV. The takeaway

For a diaspora reader, the practical implication is that the credit product you have been waiting for is no longer waiting for permission. The infrastructure to pledge a stablecoin balance and receive credit denominated in your preferred currency, under European regulatory supervision, with collateral held at a supervised custodian, now exists. The institutions building it are early, but they are real. The activity is no longer something to plan around. It is something to engage with.

For a policy reader, the implication is more uncomfortable. The credit market for diaspora capital is forming, with or without source-country regulatory engagement. Central banks and securities regulators in source-country jurisdictions can choose to engage with it — through bilateral arrangements with European supervisors, through clarified frameworks for stablecoin custody, through recognition of cross-border collateral enforcement — or they can wait until the market has formed and find themselves having to regulate it after the fact, with all the friction that implies. The choice is being made by absence.

For an industry reader, the implication is that the franchise opportunity in cross-border consumer credit is not in convincing the diaspora to come back to your branch. It is in building or partnering with the regulated parallel infrastructure that is already being used. The institutions that recognise this — and that build credible bridges between the regulated banking system and the regulated parallel collateral system — will define the next category of cross-border financial services. The institutions that wait will find themselves, in five years, watching the market work without them.

The diaspora has not been waiting for banks to onboard them. They have been building, quietly and at scale, the infrastructure that addresses their actual financial life. The institutions that engage with what has been built — rather than continuing to insist on what they wish had been built instead — will be the ones who matter.