Fed research: Stablecoins could significantly reduce cross-border payment costs, but large-scale adoption would disrupt monetary policy implementation

Three Fed economists, Kyungmin Kim, Romina Ruprecht, and Mary-Frances Styczynski, published a research note titled “Payment Stablecoins and Cross-Border Payments: Implications for Effectiveness and Monetary Policy Implementation” on the Federal Reserve’s website on March 30. This is the Fed’s first systematic analysis of the overall economic impact of stablecoins since the passage of the GENIUS Act in July 2025.

The stablecoin regulatory framework after the GENIUS Act

The research first lays out the regulatory backdrop: in July 2025, the U.S. Congress passed the GENIUS Act, establishing a regulatory framework for payment stablecoins. Under the law, stablecoin issuers must comply with the following core requirements:

Stablecoins must maintain a 1:1 peg with the U.S. dollar

Reserves are limited to low-risk assets: deposits at depository institutions, short-term U.S. Treasury bills, or balances in Federal Reserve accounts (i.e., central bank money)

No direct payment of interest; indirect remuneration mechanisms are not prohibited

The study notes that the subsequent implementation details by federal and state regulators will determine the actual scale of stablecoin adoption between wholesale and retail customers.

The “chronic illness” of cross-border payments: why correspondent banking is costly and slow

The core question the study focuses on is: where exactly does the inefficiency in the current cross-border payments system come from?

The answer lies in the intermediation chain of correspondent banking. Because cross-border payments involve high fixed costs (such as setting up overseas branches and building AML/KYC compliance capabilities), only large international banks can afford to do so. Medium and smaller banks must route transfers through correspondent banking chains, which leads to:

Slower speed: funds must be processed one by one across multiple intermediary institutions

Lower transparency: payment status is difficult to track and may get stuck at any intermediary stage

Risk of message distortion: each intermediary uses different systems, and attached messages may be modified

Repeated compliance costs: AML/CTF reviews are carried out repeatedly at each node along the chain

The situation is still worsening: according to SWIFT data, more than 60% of wholesale payments require passing through more than one intermediary; over the past decade, the number of active correspondent banks has fallen by roughly 30%, market concentration has increased, and a small number of major banks may extract economic rents through high fees or outdated infrastructure.

How stablecoins could get around it: the direct-connect model bypasses the intermediary chain

The research describes a stablecoin-driven cross-border payment scenario: individuals, businesses, and medium and smaller banks make cross-border transfers directly using dollar-denominated stablecoins, while large international banks play the role of market makers who can trade stablecoins at any time—buying and selling stablecoins to maintain liquidity. This structure can:

Shorten the intermediary chain, reducing fees and delays

Increase payment transparency (traceable on-chain)

Allow medium and smaller banks to complete cross-border business without relying on correspondent banks

The study also points out that because foreign entities holding dollar assets inherently face exchange-rate and geopolitical risks, the analysis focuses on “local currency economies with stable value,” and does not discuss the potential of dollar stablecoins as a store-of-value instrument abroad.

Three reserve strategies, three paths of monetary policy impact

The study’s most central finding is that stablecoins’ impact on the Fed’s balance sheet depends heavily on the issuer’s asset management strategy. The research sets out three scenarios:

Bank deposit backing: the issuer uses equivalent bank deposits as reserves; stablecoin outflows trigger large-scale movement of interbank reserves, requiring the Fed to adjust reserve supply

Short-term Treasury bill backing: the issuer holds T-bills; as stablecoin size expands, demand for T-bills rises, affecting short-end interest rates and the Fed’s room for maneuver in open market operations

Bank as issuer, backed by central bank reserves: funds are deposited directly with the Fed; the central bank’s balance sheet expands directly, and the impact on reserve management is the most direct

The shared conclusion across the three scenarios is: once stablecoins are adopted at large scale, the Fed may need to recalibrate its reserve management policies to deal with potentially severe and large-scale capital flows between banks and stablecoin issuers.

Why this research is worth paying attention to

The timing of the publication of this research note is notable—especially as the U.S. House and Senate actively advance detailed stablecoin legislation and the market closely watches the progress of GENIUS Act implementation. The analysis by Fed economists represents the first systematic assessment at the central-bank level: stablecoins are not only payment tools, but a structural variable that could change the transmission mechanism of monetary policy.

For the crypto industry, this research both recognizes stablecoins’ efficiency advantages in cross-border payment scenarios and clearly highlights that: the larger the scale, the deeper the impact on the traditional financial system, and the stricter the scrutiny by regulators of its asset management structure will become.

Risk warning Crypto investments carry a high level of risk; their prices may be extremely volatile, and you may lose all of your principal. Please carefully assess the risks.

This article Fed research: Stablecoins could substantially reduce cross-border payment costs, but large-scale adoption would impact monetary policy implementation was first published in Chain News ABMedia.