Could Rising Turkish Lira/Stablecoin Transactions Affect ‘Real Economic Activity’

Around the world, COVID-19 and geopolitical tensions have increased the rate of crypto adoption — and especially in emerging economies. While a crypto investor in America or Western Europe might not think these changes could affect them, BIS’s quarterly review makes it clear that “cryptoization” in emerging economies has the potential to affect everyone.

Don’t feel so stable

While there is a tendency to look at the crypto emerging from fiat-to-crypto transactions, we should also study which countries are most represented on exchanges for stablecoin transactions. The BIS review referred in particular to the Turkish lira and the Brazilian real.

Quarterly overview of BIS stated:

Notably, the Turkish lira’s share rose from 0.3% in January to 11% in April 2020. As the lira continued to depreciate in 2021, its share rose from 11% in July to 26% in December 2021. weight in global FX markets (0.5%).

But the question remains, how much does this have to do with those who trade US dollars? Well, a lot. While the USD dominates trading and stablecoin trading, the Turkish lira is now taking a larger share. This means that the fall of the lira now has the potential to cause ripples through not only the global fiat-based economy, but also the crypto economy.

Source: BIS quarterly overview

Review of BISO explained

In addition, if some cryptoassets were to be widely used as a means of payment, problems with these assets — such as stablecoin disruptions or risky cryptoasset price crashes — could spill over into payment systems and negatively impact real economic activity.

Get up together, fall together?

Now the world economy is facing a new crisis: the war between Russia and Ukraine. As both countries’ currencies lost value, Chainalysis reported a spike in trading pairs pegged to the Russian ruble and Ukrainian hryvnia. The trading pairs’ daily trade volumes for both currencies were up more than 8x each.

chain analysis suggested this could be a strategy of traders to minimize losses from their declining currencies.

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