Stablecoin Inflows and Spillovers to FX Markets

IMF Working Papers, March 27, 2026

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Using data on four USD-pegged stablecoins and 27 fiat currencies, the paper documents spillovers from stablecoin-based foreign exchange (FX) to traditional FX markets.
A gap exists between the cost of acquiring dollars via stablecoins and via the spot FX market (parity deviations).
A 1% exogenous increase in net stablecoin inflows:
- raises parity deviations by 40 basis points,
- depreciates the local currency,
- widens the dollar premium in synthetic funding markets (covered interest parity (CIP) deviations).
Counterfactual simulations show that halving cross-market frictions would:
- attenuate CIP spillovers by roughly one-half,
- cut exchange rate effects by nearly one-third.
A dynamic extension indicates spillovers grow disproportionately when intermediaries suffer losses, because depleted capital reduces their capacity to absorb further shocks.
The results establish stablecoins as an emerging segment of global currency markets with direct implications for financial stability.

Data sources:
- four USD-pegged stablecoins,
- 27 fiat currencies.
Identification strategy:
- A granular instrumental variable exploiting idiosyncratic shocks to stablecoin net inflows in other currencies is used to establish a causal link between stablecoin flows and FX markets.

1% exogenous increase in net stablecoin inflows → parity deviations increase by 40 basis points.
Counterfactual: halving cross-market frictions:
- CIP spillovers attenuated by roughly one-half,
- exchange rate effects reduced by nearly one-third.

A model of constrained arbitrage provides structural foundations for the identification strategy and rationalizes empirical findings.
Mechanism emphasis:
- Market segmentation and constrained arbitrage generate parity and CIP deviations when stablecoin flows shift.
- Intermediary capital constraints amplify spillovers in dynamic settings; losses reduce intermediaries’ capacity to absorb shocks, leading to disproportionate growth in spillovers.

Stablecoins are identified as an emerging segment of global currency markets with direct implications for financial stability.
Reducing cross-market frictions materially lessens spillovers to synthetic funding markets and exchange rates, suggesting policy and market-structure measures that improve cross-market arbitrage and intermediary capacity could mitigate transmission from stablecoin flows to traditional FX markets.

Iñaki Aldasoro, Paula Beltran, and Federico Grinberg, IMF Working Paper No. 2026/056, March 27, 2026.