Cryptocurrencies Are Now Playing a Dual Role in the Global Economy

The report highlights that nearly $600 billion in cross-border crypto transactions were recorded in Q2 2024, with most flows centered around Bitcoin, Ethereum, USDT, and USDC.

Cryptocurrencies are now playing a dual role in the global economy—part speculative asset, part payment tool, according to a new analysis from the Bank for International Settlements (BIS).

In Q2 2024 alone, nearly $600 billion in cross-border crypto transactions were recorded, the report notes, with the bulk of these flows concentrated around Bitcoin, Ethereum, USDT, and USDC.

While there's been growing hype around crypto's increasing real-world utility, the BIS suggests speculative trading remains the primary driver behind these massive volumes.

Sharp movements in global funding conditions appear to be influencing crypto flows, highlighting how the asset class is becoming increasingly entangled with traditional financial markets.

But on the fringes of this speculative activity, utility use cases are emerging. In regions struggling with high inflation or steep remittance fees, stablecoins and small Bitcoin transfers are becoming viable alternatives to conventional banking systems.

This analysis coincides with the ongoing legal battle between the U.S. Securities and Exchange Commission (SEC) and major crypto exchange Coinbase (NASDAQ:COIN), which threatens to spill over and affect the global crypto landscape.

The SEC's actions have been a hot topic at the International Monetary Fund (IMF) meetings this week, with officials discussing the need for coordinated action to regulate crypto and mitigate risks to financial stability.

As emerging markets, in particular, face the challenge of transferring funds quickly and efficiently across borders, crypto is presenting itself as a convenient solution, especially compared to the existing system of high cross-border bank transfer fees and slow processing times.

The U.S. and U.K. were the net users of both Bitcoin and USDC, while Turkey and Russia featured among the top users of USDT, according to the BIS data.

As crypto continues to integrate further into the global financial system, the risks posed by volatility, investor behavior, and unregulated flows could have broader implications for financial stability, the report concludes.