Beyond Digital Dollars: How Stablecoins Power Complex On-Chain Finance

Stablecoins Aren’t Just Digital Dollars — They’re Building Blocks for Complex On-Chain Finance

A new BIS working paper challenges one of the most common assumptions about stablecoins. Researchers often treat every stablecoin transfer as a straightforward payment, similar to sending money via a bank app or remittance service. According to “The Anatomy of Stablecoin Transactions” by Fabian Schär, Anneke Kosse, Tara Rice, Takeshi Shirakami, and Jirapat Siridhasanakul, this view misses a large part of what actually happens on programmable blockchains.

The paper shows that stablecoin activity on Ethereum is frequently embedded in sophisticated, atomically executed transaction bundles. These bundles combine trading, lending, arbitrage, liquidity provision, and settlement in ways that are impossible on traditional financial rails. Ignoring this structure leads to overstated payment volumes and distorted views of how stablecoins function in the real economy.

Transfers vs. Transactions: The Core Distinction

The authors draw a clear line between two concepts that are often conflated:

• A transfer is a single event log from a stablecoin smart contract recording a change in token ownership (sender, receiver, amount).
• A transaction is the broader instruction that bundles multiple operations together. Because of composability on Ethereum, one transaction can trigger dozens or even thousands of actions across multiple smart contracts.

A simple peer-to-peer payment might involve just one transfer event. But many stablecoin movements are only one leg of a larger atomic operation — for example, swapping USDC for another token on Uniswap, adjusting collateral on Aave, or routing liquidity through multiple protocols. These operations either succeed together or fail together.

Using 593 million event logs from 141 million Ethereum transactions involving USDT, USDC, and PYUSD throughout 2025, the authors built a transparent framework to measure this complexity. Their approach relies on publicly verifiable data: standardized event signatures and on-chain factory contracts for major protocols. It avoids proprietary address labels or behavioral assumptions that are hard to validate.

Two Main Findings

First, complexity is not a niche phenomenon — it is central to stablecoin activity.

At the transaction level, 31.6 percent of stablecoin transactions involve multiple event logs and show computational complexity well above a simple value transfer. Some of these are straightforward atomic swaps. Others are highly intricate operations involving more than 1,000 event logs and the coordinated movement of dozens of assets across multiple counterparties and protocols.

Because complex transactions tend to generate many individual transfer events, the picture changes dramatically when you look at transfers instead of transactions. Nearly 60 percent of all stablecoin transfers occur inside complex transactions rather than as standalone payments.

This wedge matters. Most empirical studies of stablecoins start from transfer-level data. Treating each transfer as an independent payment therefore misclassifies almost six in ten events. It overstates both the number and volume of “payments,” and it can produce misleading conclusions about activity concentration, velocity, and the economic role of stablecoins.

Second, the three major dollar stablecoins are not interchangeable.

USDT, USDC, and PYUSD show systematically different patterns in how they are used:

• USDC and USDT are more deeply integrated into decentralized finance. They frequently co-occur with Wrapped Ether (WETH) and major protocols like Uniswap. Their activity aligns with trading, liquidity provision, and arbitrage.
• PYUSD, issued by Paxos for PayPal, shows a distinctly different profile. It appears less embedded in complex DeFi infrastructure and more oriented toward payment-like use cases. Its transactions also differ in timing and urgency.

These differences are economically meaningful. They reflect distinct institutional designs, regulatory approaches, user bases, and intended functions rather than random variation. Analyses that lump all stablecoins together risk missing important heterogeneity.

Why This Matters for Policy and Research

The distinction between simple payments and complex settlement activity has direct implications for financial stability work. Many of the complex transactions identified in the paper resemble “money settlement” in traditional financial market infrastructures — the final step that settles wholesale obligations between participants.

Under the CPMI-IOSCO Principles for Financial Market Infrastructures, settlement assets used for this purpose carry specific risk-management expectations. The paper suggests that a significant share of stablecoin activity serves exactly this settlement function on-chain. Treating it as retail-style payments understates its systemic character.

For researchers, the findings are a cautionary tale. Linking stablecoin volumes to monetary aggregates, capital flows, or financial conditions becomes much harder when a large portion of observed transfers are actually internal legs of trading or liquidity operations. For regulators, it complicates efforts to monitor systemic risk, design appropriate oversight, and assess how stablecoins interact with traditional payment and settlement systems.

The authors emphasize that their framework is replicable and transparent. It can be applied across chains and time periods using only publicly available on-chain data, providing a more robust foundation than methods that rely heavily on vendor classifications or unverified behavioral filters.

Stablecoins as Programmable Infrastructure

The paper reframes stablecoins not primarily as digital cash substitutes, but as constitutive elements of an emerging programmable financial platform. Their value lies as much in enabling atomic, composable settlement and on-chain liquidity as in facilitating simple peer-to-peer transfers.

This does not diminish the importance of genuine payment use cases. It simply shows that those use cases sit alongside — and are often outnumbered by — more complex financial operations. As stablecoin adoption grows and regulators move toward clearer frameworks, understanding this full picture becomes essential.

The BIS paper offers a clear methodological step forward. By focusing on the intrinsic structure of on-chain transactions rather than assumptions about what individual transfers “should” represent, it gives researchers and policymakers better tools to see what is actually happening in this rapidly evolving part of the financial system.