International money transfers through traditional banking systems face delays from working hours, correspondent banks, and settlement timelines. Stablecoins offer an alternative by enabling 24/7 transactions across borders without intermediaries, allowing access to digital dollars outside traditional banking infrastructure.
However, this speed creates dual risks for the financial system, according to Anthony Vassallo, director of crypto at Silicon Valley Bank. One risk unfolds slowly over months or years through currency substitution and deposit erosion. The other moves quickly: a depeg, issuer shock, or banking event can trigger capital movement at software speed within hours.
The European Central Bank raised concerns about liquidity mismatches between stablecoin settlement and traditional banking timelines. Large stablecoin reserves held in bank deposits could trigger cascading withdrawals if redemptions surge. This dynamic played out in March 2023 when USD Coin lost its dollar peg after Circle disclosed that $3.3 billion of its reserves were held at the failed Silicon Valley Bank, turning a banking failure into a stablecoin crisis within hours.
A July 2026 Bank for International Settlements study examined stablecoin flows across 130 economies and found that both stablecoins and conventional foreign currency deposits grow during currency pressure and banking crises. Stablecoin flows appeared less affected by capital controls, offering an alternative to deteriorating local currencies that governments cannot easily contain.
Research from Sphere Labs and Silicon Valley Bank identified Argentina, Nigeria, and Turkey as markets where stablecoin demand correlates closely with demand for dollar exposure. In Argentina, 94% of crypto purchased with pesos was in stablecoins. In Turkey, approximately $38 billion worth of lira was swapped for stablecoins over one year.
A March study by the Bank for International Settlements found that increased demand for dollar stablecoins can spill into traditional currency markets. Examining four major USD-pegged stablecoins across 27 fiat currencies between 2021 and 2025, the study found that higher stablecoin demand could pressure local currencies and increase dollar costs through foreign exchange swaps, particularly when financial intermediaries faced strain.
During a January 2025 dispute between the United States and Colombia, Colombians moved funds into digital dollars while banks and currency exchanges were closed for the weekend, demonstrating stablecoins' 24/7 availability advantage.
The European Union's Markets in Crypto Assets (MiCA) regulations currently require stablecoin issuers to hold at least 30% of reserves in bank deposits. The European System of Central Banks proposed moving toward requirements based on how quickly reserve assets can be made available, avoiding scenarios where heavy redemptions drain commercial lenders overnight.
However, stablecoins are not displacing the broader financial system wholesale. According to Pankaj Bengani, co-founder of stablecoin payments company MELD, close to half of the company's business-to-business stablecoin offramp volume is in North America. The vast majority of corporates convert stablecoins back to fiat immediately after transactions settle, using stablecoins as a settlement rail rather than holding digital assets.
Major flows are cross-border commercial payments, particularly where businesses earn or hold dollars but suppliers and employees need local currency. Supplier payments represent close to one-third of business use, while invoice settlement accounts for roughly one-quarter.
Rather than replacing banks entirely, stablecoins may change how money moves through the financial system. Reserves still sit in bank deposits and Treasuries, businesses still require fiat currencies, and banks remain important for custody, compliance, liquidity, and local settlement. The shift involves the intermediary infrastructure between institutions rather than elimination of banks from the financial system.
