Stablecoin Transfers Can Be More Expensive Than Advertised Fees Suggest

Stablecoins offer a convenient way to send money internationally by tracking a currency, usually the dollar, and moving across blockchain networks. However, recipients may face challenges when trying to convert or withdraw these tokens into local currency.

When sending euros from Italy to Brazil using USDC stablecoins, the cost can vary depending on the direction of the payment. Bank of Italy researchers found that the cheaper route switched with the direction of the payment, making sense once the transfer is understood as a sequence of purchases and withdrawals in different markets.

The World Bank's remittance-price work also includes exchange-rate margins in the cost of sending money. Comparing the sender's total spending with the recipient's payout captures costs that an advertised fee can leave out. Country averages provide context, while individual households need quotes for the route and payout method they will actually use.

Stablecoins give recipients another choice by allowing them to convert part of the balance and retain the rest in dollar form. This provides control over how much to convert and can have genuine household value, especially for those who want to retain some dollars while using local currency for expenses.