Cross-border Crypto Payments: BIS Report Reveals Speculation Dominates $600 Billion Flows

Are hundreds of billions flowing across borders via crypto? A recent **BIS report crypto** analysis confirms substantial **cross-border crypto payments**, totaling around $600 billion in the second quarter of 2024 alone. But what’s driving this massive flow, and what does it mean for the future of finance? The report suggests the primary engine isn’t everyday transactions (yet), but something else entirely.

Why Crypto Speculation is the Main Driver

According to the Bank for International Settlements (BIS), the vast majority of this $600 billion in **cross-border crypto payments** is fueled by speculative activity. Their findings highlight speculative motives and global funding conditions as the key forces behind native crypto asset flows, particularly for Bitcoin and Ether.

This emphasis on **crypto speculation** signals a growing link between the crypto market and traditional finance. The BIS researchers observed that tighter global funding conditions, which typically reduce risk-taking in traditional assets, are also associated with reduced crypto flows. This connection indicates an increasing interconnectedness between cryptoassets, often treated as speculative instruments, and the mainstream financial system.

Key Insights from the Latest BIS Report Crypto

The recent **BIS report crypto** study, published on May 8, analyzed flows using the two largest cryptocurrencies (Bitcoin and Ether) and the two largest stablecoins (USDt and USDC) during Q2 2024. Beyond identifying speculation as the main driver, the report also pointed to other factors influencing flows:

• **Global Funding:** Crypto activity remains closely tied to global conditions for funding in major crypto markets.
• **Risk and Awareness:** Crypto-specific risks and heightened public awareness significantly influence investment flows, reinforcing their role as speculative assets.
• **Interconnectedness:** The correlation with traditional funding conditions highlights the growing link between crypto and legacy finance.

These findings build upon previous BIS warnings about the crypto and DeFi space reaching a critical mass that could potentially pose threats to financial stability and global wealth inequality.

Beyond Speculation: The Role of Stablecoin Payments

While **crypto speculation** dominates the overall volume, the BIS report acknowledges practical use cases. **Stablecoin payments**, particularly USDt and USDC, along with low-value Bitcoin transactions, are frequently used for everyday purposes and cross-border transfers. The report notes that geographical barriers have less influence on these types of crypto transactions compared to traditional systems.

Factors driving the adoption of **stablecoin payments** and low-value Bitcoin transactions as a transactional medium include:

• **High Fiat Opportunity Costs:** High inflation in local fiat currencies makes stablecoins and unbacked cryptoassets more attractive for bilateral cross-border transactions.
• **Economic Activity:** Greater economic activity in both sender and receiver countries often correlates with increased crypto flows.

Crypto Remittances: A Growing Alternative

One significant practical application highlighted is the use of crypto for international money transfers. High remittance fees charged by traditional financial institutions bolster the adoption of **crypto remittances**, especially for flows from developed economies to emerging markets.

Geographically, the report noted that the US and the UK accounted for a combined 20% of **cross-border crypto payments** using Bitcoin and USDC, and nearly 30% using ETH. For USDT, Russia and Turkey were significant hubs, making up over 12% of cross-border transactions using the stablecoin.

Summary

The recent **BIS report crypto** provides a clear picture of the current state of **cross-border crypto payments**. While **crypto speculation** drives the majority of the $600 billion volume, practical use cases like **stablecoin payments** and **crypto remittances** are gaining traction, especially in regions facing high inflation or remittance costs. The report underscores the increasing interconnectedness between the crypto market and traditional finance, influenced by global funding conditions and market-specific factors. As the crypto landscape evolves, understanding these dynamics, as highlighted by the BIS, is crucial for both investors and policymakers.