New York Fed: Stablecoins rise in crisis-hit countries

A New York Federal Reserve staff paper reports that dollar-pegged stablecoins flowed into blockchain wallets connected to countries facing currency or banking crises. The paper finds tagged wallets were roughly 1.8% more likely to receive stablecoins in the week a crisis began and that receipt volumes increased materially.

The August paper, by Pablo Azar, Maryam Farboodi and Nish Sinha, examined nine crisis episodes across eight countries from 2021 through 2025: Argentina, Egypt, Iran, Myanmar, Nigeria, Russia, Turkey and the United Kingdom. Researchers linked Ethereum Name Service registrations that include country signals-such as language and national identifiers-to transfer histories for 19 major dollar-pegged stablecoins on the Ethereum network.

The study used about 4.5 million wallet-week observations. It focused on wallet-country pairs that received stablecoins at some point in a 53-week window around each crisis. In the crisis week, the probability of receiving stablecoins rose about 1.9%. Sending activity increased later, with wallets 1.3% more likely to send stablecoins two weeks after the crisis began. The paper found no meaningful rise in stablecoin receipts in the two weeks before shocks.

The authors note the dataset captures behavior among wallets already active with stablecoins rather than measuring adoption across entire national populations. The sample therefore shows increased flows to connected wallets during crisis weeks, not a uniform rise in stablecoin use among all residents of the countries studied. The paper does not attribute the currency moves in those episodes to stablecoins.

The research describes how stablecoins can provide an alternative route to dollar exposure that bypasses traditional banking channels. Under standard models of open economies, governments use banks and regulated intermediaries to limit capital outflows and defend exchange rates. Stablecoins allow dollar-denominated tokens to move between blockchain wallets outside those domestic banking systems.

Major dollar tokens such as Tether’s USDT and Circle’s USDC are issued by centralized firms that can freeze addresses, and regulated trading venues can be required to block transactions or identify customers. Transfers between self-custodied wallets offer fewer immediate domestic chokepoints, the paper notes, shifting enforcement from banks to a wider set of issuers, exchanges and blockchain addresses.

The paper also places the findings in the context of market size and growth. The stablecoin market has passed $300 billion in supply. Blockchain analytics firm Chainalysis projects adjusted stablecoin transaction volume could reach $719 trillion by 2035 under one growth scenario and approach $1.5 quadrillion under a faster-adoption scenario.

Regulatory officials have raised related concerns. Federal Reserve Vice Chair for Supervision Michael Barr warned in June that U.S. stablecoin legislation leaves an illicit-finance vulnerability tied to transfers among unhosted wallets. The Bank for International Settlements has argued that stablecoin use can complicate monetary sovereignty when bearer-like tokens circulate through private wallets.

The authors conclude that the interaction between crypto payment rails and traditional policy tools matters for how countries manage capital flows. They say the available enforcement points and the blockchain routes people can access will influence how stablecoins affect future episodes of financial stress.