Can Stablecoins Reduce Exchange-Rate Volatility?

A business importing equipment can agree on a price today and discover that the bill costs more in local currency before payment arrives. Faster transfers can shorten that exposure. Easier access to digital dollars can also help businesses match their money to their obligations. But neither development automatically makes the domestic currency stronger.

That distinction sits at the heart of a new study, “Crypto to Stablecoins: Digital Money and Exchange-Rate Volatility,” accepted for publication in Research in International Business and Finance.¹ Across 28 economies, the researchers found that greater digital-money exposure was associated with lower exchange-rate volatility. The evidence was strongest when comparing countries, rather than tracking changes within each country.

The findings open a useful discussion about what financial stability means. Stablecoins could make international payments more practical while extending the dollar’s influence. For businesses, policymakers, and investors, those outcomes require separate evaluation.

What the Digital-Money Study Found

The researchers examined emerging and advanced economies between 2021 and 2024. They constructed a Digital Money Exposure index combining cryptocurrency ownership and stablecoin exposure, then compared it with fluctuations in each country’s exchange rate against the U.S. dollar.

Their baseline models accounted for inflation, economic growth, geopolitical risk, trade openness, and shared annual influences. In the pooled and random-effects models, higher digital-money exposure was associated with lower currency volatility. A one-standard-deviation increase in the index corresponded to approximately 2.5 percentage points less annualized exchange-rate volatility.

That is an association, not a prediction of what would happen if a government encouraged stablecoin adoption. When the researchers controlled for persistent differences between countries, the relationship remained negative but was no longer statistically significant at conventional levels.

The measurement constraint matters. Allocating regional flows by economic size provides an estimate, rather than a direct record of each country’s stablecoin activity. The authors tested alternative allocations and index weights, generally retaining the negative relationship, although statistical precision varied.

The index also combines two different activities: owning cryptocurrency and using stablecoins. It cannot establish that stablecoins alone produced the observed relationship.

Currency Stability Has More Than One Meaning

A stablecoin generally aims to maintain a value relative to a reference asset, often the U.S. dollar. Exchange-rate stability describes how much one national currency moves against another. Purchasing-power stability concerns what money can buy. These are related concepts, but they are not interchangeable.

A dollar-linked token could maintain its peg while the dollar rises against a user’s home currency. That may help someone preparing to pay a dollar invoice. It does not mean local wages buy more groceries or that domestic inflation has improved.

Likewise, lower volatility does not necessarily mean a stronger currency. A currency can depreciate gradually without experiencing large daily swings. The study measures variability, rather than whether exchange rates moved in a favorable direction.

This creates a useful editorial distinction: digital money may improve a company’s ability to manage payments even when the country’s broader monetary challenges remain unresolved.

Payment Speed and Dollarization Follow Different Paths

Stablecoins as a Temporary Payment Bridge

Imagine an importer converting local currency into a dollar-linked stablecoin immediately before paying a supplier. The supplier then converts the tokens into bank money. Here, the stablecoin serves primarily as a bridge between payment systems.

If that route reduces delays and reconciliation work, the business could spend less time tracking payments or maintaining precautionary balances. The benefit comes from completing a transaction more efficiently. It does not require the company to hold digital dollars permanently.

Actual savings depend on the full journey. The IMF’s August 2026 discussion of stablecoin opportunities in emerging markets notes that conversion fees and exchange-rate differences can materially affect remittance costs. A cheap blockchain transfer can still become an expensive payment once money enters and leaves the network.

Stablecoins as a Lasting Store of Value

Now imagine that the importer retains its receipts in dollar-linked tokens between transactions. Suppliers begin quoting in dollars, and households hold more digital dollars as savings. The same technology is now supporting currency substitution, commonly called dollarization.

July 2026 BIS research on stablecoin dollarization examines this new route to dollar liquidity alongside traditional foreign-currency deposits. The distinction matters because payment modernization and lasting changes in currency preferences need not have the same economic consequences.

The attached study recognizes that lower volatility could coexist with weaker domestic monetary-policy transmission. If more financial decisions depend on foreign-currency conditions, changing local interest rates may have less influence over spending and saving.

The Missing Metric Is How Long Digital Dollars Stay

A useful next step is to distinguish money passing through a stablecoin network from money remaining there. This is an analytical extension of the study, rather than a result it establishes.

Two countries could process similar stablecoin volumes yet experience different effects. In one, businesses convert tokens back into local currency within minutes. In another, recipients retain them for months. Transaction totals alone would obscure the difference between payment activity and a shift in savings preferences.

Three measures would help clarify the picture:

• How long recipients hold stablecoins before conversion or spending.
• What share of payments ultimately returns to local currency.
• What users pay across the complete transfer, including conversion.

These measures would also improve investment analysis. Repeated commercial payments, persistent balances, and low-cost conversion support different business models. Treating them as one adoption statistic makes it harder to identify where durable revenue might emerge.

Circle Offers Exposure to Stablecoin Infrastructure

That commercial distinction leads naturally to Circle Internet (CRCL ) Group, which issues USDC and EURC through regulated entities and develops infrastructure connecting digital money with financial services. Its shares offer exposure to the business behind stablecoins, rather than requiring an investor to treat a dollar-linked token as a growth asset.

In April 2026, Circle introduced CPN Managed Payments, designed to let financial institutions use stablecoin settlement while interacting in conventional currencies. Circle manages functions including minting, redemption, payment coordination, and blockchain infrastructure.

The commercial proposition addresses a practical adoption barrier: businesses may want faster settlement without operating digital-asset systems themselves. Managing those systems can create value even when customers never choose to hold stablecoins directly.

More recently, Securities.io covered Circle’s October partnership with SAP-backed Tereina to integrate stablecoin payments into enterprise software. The planned integration starts with SAP Cloud ERP, placing payment capabilities closer to the applications businesses already use.

The investment question is whether these connections generate recurring, profitable activity. Announced integrations establish distribution opportunities; actual customer usage determines their commercial significance.

Circle’s second-quarter 2026 results also identify sensitivity to interest rates, competition, and distribution arrangements. Growing stablecoin usage does not automatically produce proportional shareholder gains. Reserve earnings, partner economics, operating costs, and service revenue all influence how adoption translates into financial performance.

The study provides context for that opportunity, but it neither evaluates Circle nor demonstrates that its products stabilize national currencies.

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What Would Count as Stablecoin Progress?

The strongest practical case for stablecoins rests on measurable improvements: reliable settlement, competitive conversion rates, straightforward redemption, and useful integration with existing financial systems.

For policymakers, those improvements should be assessed alongside changes in currency preferences. A better payment service can benefit users while introducing new questions about domestic liquidity and monetary influence.

The study offers an encouraging association worth investigating with longer observation periods and better country-level data. Its broader contribution is to sharpen the question. Rather than asking whether stablecoins make money “stable,” businesses and investors should ask which risks they reduce, where those risks move, and who earns revenue by solving the remaining problems.

References:

¹ Darwiche, J., Badran, M., Awada, M., & Boungou, W. (2026). Crypto to stablecoins: Digital money and exchange-rate volatility. Research in International Business and Finance. Advance online publication. https://doi.org/10.1016/j.ribaf.2026.103678