Crypto Cross-Border Payments Hit $600 Billion In Q2 2024 Driven By Speculative Activity

The Bank for International Settlements (BIS) has released a report revealing that speculative activity is a significant driver of cross-border cryptocurrency payments, which totaled approximately $600 billion during the second quarter of 2024. The report highlights the growing interconnectedness between cryptocurrencies and traditional finance, with global funding rates playing a crucial role in crypto asset flows.

The study, published on May 8, focused on the two largest cryptocurrencies, Bitcoin (BTC) and Ether (ETH), as well as the two largest stablecoins, USDT (USDT) and USDC (USDC). The findings indicate that speculative motives and global funding conditions are key drivers of native crypto asset flows. This interconnectedness is evident as tighter global funding conditions, which typically curtail risk-taking in traditional asset classes, are associated with reduced crypto flows.

The report also noted that stablecoins and low-value Bitcoin transactions are often driven by practical use cases, such as serving as alternatives to traditional remittances. Geographical barriers have less influence on cryptocurrency transactions compared to traditional financial systems, making crypto a more flexible option for cross-border payments.

Beyond speculative investment, stablecoins and Bitcoin are used as transactional mediums. Higher opportunity costs of fiat currency usage, such as high inflation, spur bilateral cross-border transactions in both unbacked cryptoassets and stablecoins. Additionally, greater economic activity within both sender and receiver countries is often linked to increased crypto flows. High remittance fees charged by traditional financial institutions further bolster crypto adoption for international money transfers, especially from developed economies to emerging markets.

The report also highlighted the influence of crypto-specific risks and heightened public awareness on crypto investment flows, reinforcing their role as speculative assets. The findings were published nearly a month after the BIS warned that the number of investors and amount of capital in crypto and decentralized finance (DeFi) have reached a critical mass, posing a threat to financial stability and global wealth inequality.

The US and the UK accounted for a cumulative 20% of cross-border payments using Bitcoin and USDC, and nearly 30% using ETH. As for USDT, Russia and Turkey accounted for over 12% of the cross-border transactions using the world’s largest stablecoin. These figures underscore the global reach and impact of cryptocurrencies in cross-border payments, driven largely by speculative activity and practical use cases.

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