Latin America's New Money-Transfer Services Hiding Fees in Exchange Rates

A recent wave of new money-transfer services in Latin America is touting 'zero-fee' transfers, but what's behind this claim? The answer lies in a combination of technology and tax policy.

The Salvadoran government has introduced the Chivo electronic wallet, which uses Bitcoin as legal currency. However, most users rely on stablecoins to convert their dollars into local currencies. This 'stablecoin sandwich' architecture allows for cheaper transfers, with fees under 1% compared to traditional correspondent-bank routing.

The new tax rule in the US, effective January 2026, charges a 1% excise tax on cash and money-order transfers but leaves bank- and card-funded digital transfers untouched. This means that users who don't have access to a US bank account or trust a digital wallet will be disproportionately affected by this tax.

The launch of Félix Pago and Kravata, two rival apps, is not coincidental. Both companies are leveraging the stablecoin infrastructure to offer 'zero-fee' transfers. However, the actual cost lies in the exchange rate, which can be marked up invisibly. A sender should always check the mid-market exchange rate and compare it against what the app offers.