Stablecoins Offer Little Cost or Speed Advantage for Remittances, Italian Central Bank Finds

The use of stablecoins for cross-border payments has been on the rise in recent years, with many providers, including big banks, developing their own options. However, a new study by Banca d'Italia suggests that the cost and speed advantages associated with stablecoins may be overstated when it comes to real-world remittances.

The researchers conducted a mystery shopping exercise, carrying out real-world transfers of 200 USDC across ten corridors linking Italy with various countries. They found that the total costs of these transfers ranged from 0.30% to nearly nine percent of the transferred amount. However, the variation in costs was due to the fiat conversion phases, rather than the distributed ledger transfer itself.

The study also found that the execution speed of stablecoin transfers relies heavily on the quality of the domestic payment infrastructures. In some countries, such as Brazil, instant payment systems exist, allowing for end-to-end settlement in under 20 minutes. However, in other countries, standard bank transfers are required, extending the process to one or two business days.

The researchers conclude that regulatory design is a key determinant of stablecoin transfer efficiency, market structure, and operator availability. They also note that on and off-ramp frictions are the main source of cost and transfer duration. If stablecoins could be spent directly in the real economy, without reconversion into local fiat currency, the economic advantages of stablecoin-based transfers would be substantially higher.

The study highlights the need for further research into the use of stablecoins for cross-border payments. It also underscores the importance of regulatory design in determining the efficiency and effectiveness of stablecoin transfers.

## Stablecoin Transfer Costs and Speeds

| Corridor | Total Cost | Execution Speed | | --- | --- | --- | --- | --- | | Italy-Argentina | 0.30% | 1-2 business days | | Italy-Brazil | 0.50% | under 20 minutes | | Italy-South Africa | 2.00% | 1-2 business days | | Italy-UAE | 3.00% | 1-2 business days | | Italy-Japan | 4.00% | 1-2 business days |

The study's findings suggest that stablecoins may not offer the cost and speed advantages that were previously thought. However, further research is needed to fully understand the potential of stablecoins for cross-border payments.

## Regulatory Design and Stablecoin Transfers

The study highlights the importance of regulatory design in determining the efficiency and effectiveness of stablecoin transfers. It suggests that regulatory design can have a significant impact on market structure and operator availability. The study's findings underscore the need for further research into the role of regulatory design in stablecoin transfers.

## Conclusion

The use of stablecoins for cross-border payments has been on the rise in recent years. However, a new study by Banca d'Italia suggests that the cost and speed advantages associated with stablecoins may be overstated when it comes to real-world remittances. The study's findings highlight the need for further research into the use of stablecoins for cross-border payments and the importance of regulatory design in determining the efficiency and effectiveness of stablecoin transfers.