A recent report by the Bank for International Settlements (BIS) reveals an increasing reliance on Bitcoin
$
103,795and other digital assets during periods of economic stress. The report highlights an emerging tendency among countries experiencing high inflation, costly money transfers, or foreign exchange restrictions to gravitate towards cryptocurrency solutions.
Turning to Cryptocurrency in Economic Challenges
Many individuals in countries with faltering financial systems or rising transfer costs are seeking alternative financial avenues. Bitcoin, along with stable cryptocurrencies like USDT and USDC, is gaining popularity as a result. These digital assets are providing quick and controlled financial tools for international money transfers and during times when local currency values are declining.
The report points out that the usage of cryptocurrencies spikes during times when governments impose restrictions on capital movements to manage inflows and outflows. Consequently, digital assets are becoming a means for individuals to circumvent such limitations.
According to the BIS report, cryptocurrency utilization becomes pronounced in scenarios of high inflation, escalating transfer costs, and regulatory constraints. People are increasingly choosing digital currencies when traditional financial systems fail to meet their needs.
Significant Surge in Cross-Border Crypto Transfers
Data gathered by BIS from 2017 until the mid-2024 period encompasses cryptocurrency exchanges and application usage. Cross-border cryptocurrency transfers have exhibited a remarkable growth from around $7 billion in early 2017 to over $800 billion by the end of 2021. Although this figure reduced to $400 billion in 2022 following a downturn in crypto markets, it surged to approximately $600 billion by the second quarter of 2024.
In earlier years, about 80% of these transfers comprised Bitcoin. However, the proportion has recently fallen below 25%, indicating a shift towards stablecoin solutions. This evolution does not signify a decline in Bitcoin’s importance but rather reflects users’ diversified needs.
Usage Adapts to Needs
The BIS report underscores that cryptocurrency usage is dictated more by necessity than geography or local customs. Individuals unable to trust traditional banking infrastructures or facing financial pressure resort to digital currencies like Bitcoin as alternatives.
Additionally, the report highlights a correlation between rising indicators of global financial stress, such as the VIX index, and increased usage of Bitcoin and other cryptocurrencies. This trend extends beyond individual users and involves investors and corporations navigating uncertain times.
The BIS study emphasizes that the primary utility of cryptocurrencies is not just investment; they offer practical financial solutions during crises. People can access services unattainable through traditional means via cryptocurrency, thereby safeguarding their financial freedom. The rapid ascent in cross-border transfers and the growing share of stablecoins indicate that the crypto market continues to evolve in a user-centric manner.