Cryptocurrency Emerges as a Crisis Currency Amid Surging Cross-Border Flows
By Ben Knight
May 12, 2025
In a recent report by the Bank for International Settlements (BIS), a significant rise in the use of cryptocurrencies for cross-border payments has been documented, with total flows approaching $600 billion. This marks a comeback for digital assets, especially after a notable dip during the 2022 crypto bear market, where transaction volumes fell sharply from their record highs of over $800 billion in 2021. #### Steady Demand for Cryptocurrencies in Remittances
The BIS study highlighted that Bitcoin continues to play a role in minor remittances, yet stablecoins have emerged as the primary choice for cross-border transactions. This preference is particularly evident in developing economies, where recipients of these transactions often reside. The study concluded that in nations where traditional remittance fees can exceed 6%, the adoption of cryptocurrencies as an alternative method for sending money is growing rapidly.
Raphael Auer, Ulf Lewrick, and Jan Paulick, BIS authors of the report titled "DeFiying Gravity," explained that "the high costs of remittance payments through traditional financial intermediaries are associated with significantly larger cross-border flows in stablecoins and low-value Bitcoin payments." This trend suggests a shift in how individuals view and utilize digital currencies, particularly in the face of economic instability.
A Growing Solution to Traditional Remittance Costs
As the report outlines, the steep fees and inefficiencies associated with conventional money transfer services are motivating more people to turn to cryptocurrency. Specifically, stablecoins have been preferred in regions where local currencies are subject to high inflation or volatility. The primary source of these funds is advanced economies such as the United States, United Kingdom, and Singapore, with recipients overwhelmingly located in developing countries like India, Nigeria, and Turkey.
This dynamic reflects broader macroeconomic challenges, with increased cryptocurrency flows correlating strongly with political and economic instability in recipient countries. Although cryptocurrencies have not yet supplanted traditional financial systems, their growing influence in the remittance space is undeniable.
Conclusion
The findings of the BIS report underscore the evolving role of cryptocurrencies as a potential alternative to traditional banking systems, particularly for cross-border transactions. As digital assets continue to gain traction and functionalities evolve, they provide a critical pathway for individuals seeking more efficient and cost-effective means of sending money across borders.
The cryptocurrency landscape remains dynamic, and as international economic conditions fluctuate, the prominence of digital currencies may shape the future of remittances in significant ways.
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