Stablecoins, pegged to the dollar or other fiat, operate as a fragmented on-chain foreign exchange market. Liquidity sits in dispersed pools across issuers, blockchains, and DeFi venues, which can create price differences and uneven access to dollar liquidity for traders big and small.
Moving stablecoins may look straightforward on the surface, but in practice it often requires a multistep, cross-chain journey through multiple pools and routes. “It’s a very special case of a foreign exchange market onchain, and that leads to bad user experience, with unexpected slippage, transaction reversion and unfamiliar information when moving your dollar from point A to point B,” said Ryne Saxe, CEO of Eco, a stablecoin infrastructure company, in an interview with Cointelegraph.
DefiLlama data put stablecoins’ total market capitalization above $320 billion, led by Tether’s USDT and Circle’s USDC. As institutions and large traders start moving bigger sums on-chain, executing cleanly and efficiently becomes progressively harder.
While stablecoins have continued to grow despite bearish sentiment in crypto markets, the liquidity behind them remains distributed across issuers, chains, and DeFi venues, which affects pricing and accessibility as size increases.
Stablecoins aren’t as fungible as they seem
A stablecoin may be pegged to the dollar or another fiat, but it does not trade as a single, fungible asset. Different issuers, chains, and DeFi venues each exhibit their own depth, pricing, and access conditions, leading to non-identical markets for what are nominally the same dollar-pegged tokens.
“Stablecoins, between them, aren’t very fungible,” Saxe explained. “The different profiles between those markets mean pricing and moving stablecoins seamlessly and efficiently across them is actually a hard problem that people take for granted.”
In practice, a dollar stablecoin on one chain may not be perfectly equivalent to the same asset on another chain. Divergences in collateral backing, market access, and liquidity depth can create price gaps that widen with size or in thinner markets. These gaps are typically negligible in the most liquid corridors, but they become more pronounced as trades scale up.
In a March report, Borderless found that pricing divergence hinges largely on where liquidity is sourced. The firm tracked hourly buy and sell rates across 66 stablecoin-to-fiat corridors, spanning 33 currencies and seven blockchains. The picture was nuanced: USDC and USDT traded at nearly identical prices in most corridors, but provider-level differences could exceed hundreds of basis points, shaping execution quality depending on routing and access to liquidity. The study’s takeaway is that while pocketed prices across major corridors align, the real frictions live in the fragmentation of liquidity behind the scenes.
Stablecoins become harder to move at scale
For many users, stablecoins are becoming a central tool for on-chain treasury management, cross-border payments, and DeFi yield strategies. Institutions, in particular, move tens of millions of dollars at a time and require fast, predictable execution. When liquidity is spread across multiple pools and chains, selling one stablecoin and buying another in a single step can push the market, forcing traders to break the transaction into multiple branches that route through different venues and then converge at the destination.
“If liquidity is spread out, trying to sell $10 million of one stablecoin and buy $10 million of another in a single step will move the market,” Saxe said. “What usually needs to happen is breaking that transaction into multiple branches, which may route differently and converge at the destination.”
That fragmentation compounds execution risk and introduces uncertainty for institutions because it is harder to guarantee price, speed, and certainty when moving large sums across on-chain liquidity. In this environment, traditional FX-like liquidity pools on a single chain seldom capture the full picture, and the need to navigate multiple chains, issuers, and venues becomes the norm rather than the exception.
Infrastructure bets: infrastructure, not more supply
Industry players are actively building tools to address these gaps, but they approach the problem from different angles. Circle, the issuer behind USDC, is positioning stablecoins as the foundation of an expanded FX infrastructure, aiming to connect multiple currencies, liquidity providers, and settlement layers via shared infrastructure. Eco, by contrast, concentrates on routing and execution, aggregating liquidity across fragmented markets to improve price discovery and transaction flow.
Both lines of effort acknowledge a core truth: while stablecoins exist across many chains and issuers, the liquidity backing them is uneven. Moving funds thus involves interacting with a dispersed liquidity system, which can introduce pricing differences, routing complexity, and execution risk. “Fragmentation creates more spread between prices, meaning worse execution in many cases. To solve that, you need to read across markets, see the full liquidity picture, even if it’s fragmented, and route across it,” Saxe noted.
For institutions, the implication is clear: until liquidity becomes more predictable and accessible on-chain, large-scale stablecoin flows will remain constrained by risk management and trust considerations. Only when the on-chain liquidity map becomes more transparent and reliable will institutions feel confident to move or hold substantial stablecoin balances at scale.
As the market evolves, observers will be watching how Circle’s and Eco’s approaches evolve, and whether Borderless’ ongoing data and similar analyses confirm a path toward more unified on-chain dollar liquidity. The next wave of cross-chain stablecoin infrastructure could determine whether the sector can unlock true capital efficiency at scale.
