Stablecoin Growth Puts 24/7 FX Liquidity Under Pressure
Stablecoin growth is expected to bring more foreign exchange activity onchain, but it could expose liquidity gaps outside normal market hours. TransFi CEO Raj Kamal said more than 70% of conversions into dollar stablecoins already begin in currencies other than the US dollar, creating FX demand even when payments use dollar-denominated tokens.
The Bank for International Settlements reported that 99.4% of fiat-backed stablecoins by market value were dollar-pegged. New euro, sterling, yen and other local-currency stablecoins could reduce conversion steps for corporate payroll, supplier payments and treasury transfers. However, 24/7 blockchain settlement does not guarantee deep 24/7 FX liquidity. Weekend and overnight conversions may face wider spreads, smaller trade sizes and higher fees as market makers manage unhedged currency exposure.
Kamal also warned that liquidity could fragment across currencies, issuers, blockchains and payment networks. Dollar stablecoins may remain important intermediary assets because dollar trading pairs typically offer deeper liquidity. The dollar appeared on one side of 89% of global FX trades in April 2025, when average daily FX turnover reached $9.6 trillion.
Recent initiatives include Revolut’s rollout of the EURR stablecoin, Standard Chartered’s distribution of HKDAP, and a planned stablecoin venture backed by 21 financial institutions. Banks will need redemption services, FX inventory, cross-chain connectivity and links to conventional deposits before stablecoins can support large-scale commercial payments. For traders, execution quality, liquidity concentration and time-zone risk may matter more than total token supply.
Neutral
The market impact is neutral because the article describes an infrastructure trend rather than a confirmed change in stablecoin demand, prices or capital flows. Stablecoin growth could be bullish over the long term by expanding onchain payments, increasing demand for settlement assets and attracting banks and institutional liquidity. New local-currency tokens could also improve foreign exchange access and support broader blockchain adoption.
However, the near-term trading effect is limited. The main risks are wider spreads, lower liquidity and higher slippage during weekends or regional off-hours. Fragmentation across issuers and blockchains could further concentrate activity in the most liquid dollar stablecoins instead of creating broad demand across all tokens. This resembles earlier institutional tokenisation announcements, which often improved sentiment but had little immediate effect on spot prices until transaction volumes and network revenues increased.
Traders should monitor stablecoin issuance, exchange balances, onchain transfer volume, FX spreads and liquidity in EURR, HKDAP and major dollar stablecoin pairs. A sustained rise in minting and settlement activity could become bullish for payment-focused networks and related infrastructure. Conversely, redemption stress, depegging or persistent weekend liquidity gaps could increase volatility and create bearish pressure across stablecoin markets.