Stablecoin Payments Come with Hidden Costs

The convenience of sending money using stablecoins is often touted as a game-changer for international transfers. However, when it comes to actually spending the received funds, things can get complicated.

Consider a scenario where someone sends euros from Italy to Brazil via the USDC (USD Coin) network. The transfer may take seconds, but the recipient in Brazil still has to navigate various exchange rates and fees to convert the tokens into local currency (reais).

A study by the Bank of Italy found that the cost of sending $200 through the USDC route can vary depending on the direction of the payment. For instance, transferring from Italy to Brazil costs around 2.70% with a fee of $5.40, whereas sending from Brazil to Italy incurs a higher cost of 4.68-4.89% with a fee of $9.36-$9.78.

The World Bank's remittance-price work also highlights the importance of exchange-rate margins in the overall cost of sending money. When comparing sender and recipient costs, it becomes clear that stablecoin payments can be more expensive than they initially seem.