As stablecoins spread as a near real-time tool for moving funds around the clock, an analysis says they could speed up the pace at which money leaves bank deposits and national currencies during financial instability or currency depreciation. The ability to move money quickly and cheaply across borders could instead add to liquidity pressure on the financial system.

On Oct. 1 local time, blockchain media outlet Cointelegraph reported that unlike the traditional banking system, stablecoins can be traded and settled 24 hours a day. That structure allows users to shift quickly into dollar-based digital assets instead of local currencies.

The key is the difference in the speed of fund flows. Traditional banking is affected by business hours, correspondent banks and payment and settlement procedures. Stablecoins can be transferred via blockchain effectively year-round. If financial markets become unstable or a local currency plunges, that feature could accelerate capital outflows.

The European Central Bank sees this as a liquidity mismatch between digital money and the banking system. Stablecoins can be redeemed 24 hours a day, but the reserve assets backing them move according to the settlement timetable of the traditional financial system. If large redemption requests arrive at once, a time gap could emerge between reserve assets and actual funding demand.

There is also a real-world example. When Silicon Valley Bank (SVB) collapsed in March 2023, it became known that $3.3 billion of USD Coin (USDC) reserves were deposited at SVB, shaking USDC's dollar peg. It was a case in which a bank liquidity crisis spread within a day into instability in the stablecoin market. Authorities intervened at the time to protect depositors.

The Bank for International Settlements is also watching the impact of the spread of stablecoins on financial markets. In July, the BIS said its analysis of 130 jurisdictions found that stablecoin flows and traditional foreign-currency deposits tended to increase together during currency pressure or banking and sovereign crisis situations.

In particular, stablecoin funds appeared to be relatively less affected by capital controls. That means users may try to avoid a loss in value by converting money in bank accounts into dollar-based stablecoins when a local currency falls sharply.

Reports by Sphere Labs and Silicon Valley Bank presented Argentina, Nigeria and Turkey as representative cases. Arnold Lee, chief executive of Sphere Labs, explained the essence of the spread of stablecoins as demand for dollars. People who find it difficult to use the traditional banking system choose stablecoins to access the relatively stable dollar, he said.

The report said 94 percent of cryptoassets bought in Argentina with pesos were stablecoins. In Turkey, it found that about $38 billion worth of lira was converted into stablecoins over a year.

Rising stablecoin demand could also affect local currency markets. In a separate study published in March, the BIS analysed 27 fiat currencies and four major dollar-pegged stablecoins from 2021 to 2025. It found that rising stablecoin demand could put downward pressure on local currencies and raise the cost of sourcing dollars through FX swaps.

There is also an argument that if residents in high-inflation countries quickly move into stablecoins instead of local currencies, monetary policy transmission could weaken and the deposit base could shrink. That is because money may move in markets before central banks respond.

In Europe, related regulatory discussions are continuing. The European Union's Markets in Crypto-Assets (MiCA) rules currently require stablecoin issuers to hold at least 30 percent of reserves as bank deposits, and require significant asset-referenced tokens to hold up to 60 percent as bank deposits.

Within the European Central Bank system, a proposal has been made to shift regulation from such fixed ratios to standards based on how quickly reserve assets can be converted into cash. The aim is to reduce situations in which commercial bank liquidity drains out over a short period when stablecoin redemptions concentrate.

Some argue stablecoins do not immediately replace banks. Pankaj Bengani, a former Block executive and co-founder of stablecoin payments firm Meld, said corporate clients’ use of stablecoins is closer to payments and settlement than investment.

He said corporate users convert a substantial share back into fiat currency immediately after transactions are settled. He said companies do not seek to hold stablecoins for a long time but use them as a settlement tool to replace SWIFT, the existing international payment network.

Companies using them range widely, including import and export firms, technology companies, e-commerce companies, payment firms and fintech companies. The main use is cross-border commercial payments, followed by payments to partners and invoice settlement.

For this reason, another analysis says stablecoins are more likely to change the route money moves through than eliminate banks’ role in the financial system itself. That is because stablecoin reserves are still based on bank deposits or U.S. Treasuries, and both companies and consumers ultimately need fiat currency.

Ultimately, the key question that the spread of stablecoins poses to financial markets is not whether banks disappear, but how the speed and route of money flows change. While fast and cheap payments can raise financial efficiency, they may also increase the likelihood that money flows and liquidity pressure accelerate when financial instability emerges.