Stablecoin Cross-Border Payments Fail to Deliver Promised Efficiency

Researchers from Italy's central bank and Project Agorá conducted experiments on stablecoin cross-border payments. They used 'mystery shopping' to transfer 200 USDC across 10 corridors connecting Italy with Argentina, Brazil, South Africa, the UAE, and Japan. The study found that stablecoins provided no systematic cost advantage over traditional remittance services.

Total expenses ranged from 0.30% to almost 9% of the amount transferred, while completion times varied from less than 20 minutes to two business days. Project Agorá's cross-border settlement pilot using tokenization of wholesale cross-border payments demonstrated an average time from payment initiation to settlement of about 80 seconds.

The study reveals that a faster settlement asset cannot repair fragmented financial systems on its own. The 'stablecoin sandwich' structure, with the blockchain transaction between fiat on-ramp and off-ramp, creates another group of intermediaries. Cryptocurrency exchanges function like digital correspondent banks, controlling access, liquidity, pricing, and conversion.

The study found that stablecoins need efficient conventional payment systems to deliver promised efficiency. In corridors supported by strong domestic instant-payment infrastructure, stablecoins performed well. However, in South Africa, the delay came from standard bank transfers used at the beginning or end of the transaction.