Bank of Italy research suggests stablecoins aren't necessarily cheaper for remittances

A study published by the Bank of Italy tested 200 USDC stablecoin remittances sent from Italy to countries including Argentina, Brazil, South Africa, the UAE, and Japan, across 10 different international payment corridors. The total costs of these transactions varied widely, from about 0.3% to nearly 9% of the amount transferred. The research found that blockchain transaction fees themselves were only a very small part of the total cost. Instead, the majority of expenses came from other parts of the payment process, such as converting euros into USDC, withdrawing funds into local currency, foreign exchange spreads, and fees charged by exchanges and domestic banks.

The study highlights that stablecoins have solved the issue of moving value quickly and cheaply on-chain, with blockchain transfers costing only a few cents and often settling in minutes. However, stablecoins have not yet addressed the costly "last mile" of converting between crypto and local fiat currencies, which still involves multiple intermediaries and fees. This means that while stablecoins can reduce costs in some corridors and offer features such as always-on settlement and programmable payments, they do not yet consistently offer cheaper remittances than traditional money transfer operators when considering the entire payment journey from bank account to recipient.

Researchers emphasize that the current stablecoin remittance ecosystem typically replaces traditional correspondent banks with other intermediaries like centralized exchanges or brokers, rather than eliminating middlemen altogether. Foreign exchange spreads and conversion fees remain significant contributors to the total cost, meaning many recipients still end up paying high fees before they receive usable local currency. The Bank of Italy suggests that as regulated off-ramp providers increase under frameworks like Europe’s MiCA and closer integration with domestic instant payment systems develops, some cost reductions may occur in the future. However, the fundamental challenge of the conversion process and foreign exchange will likely remain a cost factor.

In summary, the Bank of Italy's research shows that while stablecoins improve the speed and efficiency of cross-border transfers on blockchain, they have not yet lived up to the promise of consistently lower remittance costs once all intermediaries and currency conversions are accounted for. Stablecoins’ main benefits currently lie in their settlement speed and programmability rather than in absolute cost savings for everyday remittance users who require fiat currency at the end of the process.