New York Fed report says stablecoins may make currency crises harder to contain

A New York Federal Reserve study found that dollar stablecoins may make future currency crises harder to contain. Wallets tied to countries experiencing currency or banking crises were 1.8% more likely to receive dollar stablecoins during the week a crisis began. Receipt volumes also increased during those periods. The researchers studied nine episodes across eight countries between 2021 and 2025. The episodes involved monetary disruptions, banking restrictions, sanctions and devaluations in Argentina, Egypt, Iran, Myanmar, Nigeria, Russia, Turkey and the United Kingdom. The researchers linked Ethereum Name Service registrations with country signals to transfer histories for 19 major dollar-pegged stablecoins. The signals included languages, scripts and national identifiers. A separate analysis found no significant increase in stablecoin receipts during the two weeks before the shocks. The probability of receiving stablecoins rose 1.9% during the crisis week in that analysis. Wallets became 1.3% more likely to send stablecoins two weeks after the crisis began. The dataset contained about 4.5 million wallet-event-week observations. The sample covered wallet-country pairs that received stablecoins during a 53-week window around each crisis. The results describe changing behavior among wallets already connected to stablecoin activity. They do not show that stablecoin adoption increased by 1.8% across an entire national population. The paper does not establish that stablecoins caused particular currencies to weaken during the nine episodes. The researchers model stablecoins as weakening the enforcement channel that governments use through banks and other regulated intermediaries. Households facing restrictions on buying or transferring dollars through banks may instead receive dollar-denominated tokens in blockchain wallets. USDT and USDC are issued by centralized companies that can freeze addresses. Regulated exchanges can be required to restrict transactions or identify customers. Self-custodied wallet transfers can leave governments with fewer immediate domestic enforcement points. The stablecoin market has grown beyond $300 billion. The market is expected to reach trillions of dollars before the end of the decade. Chainalysis estimates that adjusted stablecoin transaction volume could reach $719 trillion by 2035 through organic growth alone. Chainalysis estimates that volume could approach $1.5 quadrillion if broader macroeconomic and adoption trends accelerate usage. New York Fed Vice Chair for Supervision Michael Barr warned in June that US stablecoin legislation left an illicit-finance vulnerability around secondary-market transfers involving unhosted wallets. The Bank for International Settlements has also warned that stablecoin dollarization can threaten monetary sovereignty. The broader monetary-policy consequences remain theoretical. Governments retain control points through banks, stablecoin issuers, regulated exchanges and other intermediaries.