Bank of Italy finds no consistent cost advantage for stablecoin remittances
A Bank of Italy study found that stablecoin-based remittances did not offer a systematic cost or speed advantage over traditional payment channels. Fiat on- and off-ramp frictions accounted for most costs and transfer delays.
Intelligence analysis by Llama
The study found that exchange fees and currency conversion made up most of the cost of stablecoin remittances, while blockchain transaction fees represented only a small share. The researchers tested 200 USDC remittances across 10 bidirectional payment corridors.
Imagine you want to send money to a friend who lives in another country. You can use a special kind of money called a stablecoin, which is like a digital dollar. But, the study found that it's not always the cheapest or fastest way to send money. Sometimes, it's better to use the regular money of the country you're sending to. This is because the regular money system is often faster and cheaper than the stablecoin system.
Analysis
Fiat Infrastructure Limits Stablecoin Remittance Efficiency
A Bank of Italy study found that fiat conversion costs and payment infrastructure, rather than blockchain fees, accounted for most of the differences in stablecoin remittance costs and settlement times. The researchers tested 200 USDC remittances across 10 bidirectional payment corridors linking Italy with Brazil, Argentina, Japan, the United Arab Emirates, and South Africa, comparing end-to-end costs and settlement times with traditional remittance services.
Regulation Shapes Remittance Efficiency
The study also found that regulatory design played a major role in determining transfer efficiency. The authors said prohibitionist regulatory regimes failed to fully suppress stablecoin demand and instead pushed users toward offshore platforms and other unregulated channels, while overly restrictive frameworks increased operational complexity for retail users.
Investment in Domestic Payment Infrastructure
The study concluded that investment in domestic instant payment infrastructure could improve the competitiveness of stablecoin-based cross-border payments, finding that settlement times depended heavily on the quality of local payment rails. The authors argued that the biggest gains may come when stablecoins no longer require conversion back into fiat currency, writing: If stablecoins could be spent directly in the real economy, for goods and services, rents, or school fees, without reconversion into local fiat currency, the economic advantages of stablecoin-based transfers would be substantially higher.
Key points
- A Bank of Italy study found that stablecoin-based remittances did not offer a systematic cost or speed advantage over traditional payment channels.
- Fiat on- and off-ramp frictions accounted for most costs and transfer delays.
- The study found that exchange fees and currency conversion made up most of the cost of stablecoin remittances.
- The researchers tested 200 USDC remittances across 10 bidirectional payment corridors.
- Investment in domestic instant payment infrastructure could improve the competitiveness of stablecoin-based cross-border payments.
If stablecoins can be spent directly in the real economy without reconversion into local fiat currency, the economic advantages of stablecoin-based transfers could be substantially higher. This could lead to increased adoption and efficiency in cross-border payments.
If prohibitionist regulatory regimes continue to push users toward offshore platforms and other unregulated channels, it could lead to increased operational complexity for retail users and decreased efficiency in cross-border payments.
