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Hundreds of billions of dollars in international cryptocurrency transactions circulate globally, primarily propelled by speculative investments, as detailed in a recent report by the Bank for International Settlements (BIS).
The BIS analysis, released on May 8, revealed that cross-border transactions involving the two largest cryptocurrencies, Bitcoin (BTC) and Ether (ETH), along with the two major stablecoins, USDt (USDT) and USDC (USDC), combined to approximately $600 billion in the second quarter of 2024, the last observation period covered by the analysis.
“Our research underscores speculative drivers and global funding conditions as significant influences on native crypto asset movements,” the BIS stated.
Nevertheless, the report highlighted that stablecoin and low-value Bitcoin transactions are often motivated by practical applications, particularly serving as alternatives to conventional remittances. The researchers noted that geographical obstacles have diminished impact on cryptocurrency transactions in contrast to traditional finance.
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Speculative cryptocurrency activities remain linked to “global conditions for financing in prominent crypto markets,” indicating an increasing “interconnectedness” between cryptocurrencies and the traditional financial system, the researchers added:
“At the same time, we note that stricter global funding conditions, which are known to limit risk-taking in traditional asset sectors, correlate with lower flows. This indicates a growing interconnectedness between crypto assets as speculative elements and mainstream finance.”
Moreover, specific crypto-related risks and elevated public awareness significantly shape crypto investment flows, reinforcing their classification as speculative assets, according to the BIS.
The observations were disclosed almost a month after the BIS cautioned that the count of investors and volume of capital in crypto and decentralized finance (DeFi) had “reached a critical threshold,” presenting a risk to financial stability and global wealth disparity, Cointelegraph reported on April 19.
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Stablecoin, low-value Bitcoin transactions fueled by fiat inflation, high transfer charges
Besides serving as speculative investment instruments, stablecoins and Bitcoin are used as a “transactional means.”
“Increased opportunity costs associated with fiat currency, such as high inflation, drive bilateral cross-border transactions in both unbacked cryptoassets and stablecoins,” the BIS noted, adding:
“Similarly, enhanced economic activity within both sending and receiving nations is typically linked to greater crypto flows in most instances.”
Exorbitant remittance fees levied by traditional financial institutions further fuel crypto adoption for international transfers, particularly from developed nations to emerging economies, as stated in the report.
The US and the UK represented a combined 20% of cross-border payments utilizing Bitcoin and USDC, and nearly 30% with ETH.
In the case of USDT, Russia and Turkey accounted for over 12% of the cross-border transactions with the world’s leading stablecoin.
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