Stablecoin flows spill into currency markets, BIS-IMF paper finds

A working paper from the Bank for International Settlements and the International Monetary Fund presents what its authors call the first causal evidence that stablecoin trading spills into traditional foreign exchange markets. Ledger Insights reports the effect runs in two directions. Local currencies depreciate. Dollar funding costs rise for banks and corporates that have never touched crypto.

The paper studies daily trades in four dollar-pegged stablecoins. It tracks them against 27 fiat currencies. The sample covers 64 centralized exchanges. The data run from January 2021 through November 2025. That is nearly five years of daily observations, long enough to test causality rather than mere correlation.

More than 70 percent of cumulative net inflows into the stablecoin market come from non-dollar currencies. A customer in Turkey buys USDT with lira. A customer in Brazil buys it with reais. Each time, the buyer is selling local currency and taking on dollar exposure. The settlement rail is a blockchain, but the economic content is a foreign exchange transaction.

Taken together, the researchers argue, those individual trades create a parallel stablecoin-based FX system. Their empirical contribution is to show that the parallel system leaks. The flows show up in the traditional currencies those stablecoins are meant to represent, and in the price banks charge for dollar funding.

The label 'first causal evidence' matters. Earlier work stopped at correlation or theory. If the causal claim survives the scrutiny a working paper invites, the stablecoin debate shifts from niche market structure to monetary and currency policy.

The paper's geographic focus is itself a finding. The largest source of stablecoin demand sits in economies with their own currency pressures. The mechanism runs through the dollar pegs those buyers want.

For regulators, the paper changes the stablecoin question. The usual debate treats digital dollars as a payments or custody issue: who charters the issuer, what assets back the tokens, how redemptions settle. The BIS-IMF finding says stablecoins are also a foreign exchange phenomenon. That gives central banks and treasury authorities a direct stake in a market they do not supervise.

Stablecoin demand tends to put pressure on local currencies and to raise dollar funding costs. For an emerging-market central bank, large stablecoin inflows are therefore not neutral. They are, in effect, a capital-flow event occurring outside the capital account.

No bad intent by issuers or exchanges is required. A stablecoin pegged to the dollar is a dollar proxy. When non-dollar buyers accumulate it, they reduce their net position in local currency. The effect is identical whether the buyer is hedging, fleeing, or speculating. That is why the spillover is robust to motive.

The finding on dollar funding costs will get read aloud in risk committees. A corporate treasurer with a dollar loan, or a manufacturer with dollar-denominated input costs, can be on the receiving end of stablecoin flows without ever holding a token. The externality lands outside crypto.

For institutions, the practical takeaway is that stablecoin flows are not self-contained. Any firm running a stablecoin treasury, offering custody, or making markets across crypto and FX now has documentation that the two books are connected. The connection runs through centralized exchanges, where the paper's data lives. Those 64 venues are the unavoidable starting point for any supervisor trying to watch this.

This is a working paper, not a final settlement. The methods will be tested, and the identification strategy will be challenged. The baseline arithmetic is harder to challenge: most stablecoin demand originates outside the dollar area. For supervisors, the 64 exchanges in the sample are the first place to look.