A recent study conducted by the Bank of Italy has revealed that stablecoins do not offer significant advantages in terms of cost and speed for money transfers. Any potential benefits are negated by fees associated with converting to and from fiat currency, as well as issues within local payment infrastructures.
The researchers analyzed transfers of 200 USDC across ten bilateral corridors linking Italy with Brazil, Argentina, Japan, the UAE, and South Africa. They evaluated the overall costs and processing times compared to traditional money services.
Source: Bank of Italy.The total costs for stablecoin transfers ranged from 0.3% to nearly 9%, depending on the specific corridor. In regions where instant payment systems were available, transactions took less than 20 minutes. However, in areas lacking such infrastructure, processing times extended to one or two business days.
Source: Bank of Italy.Key costs and delays were attributed to currency exchange and conversion processes, along with the quality of local infrastructure. The researchers noted that blockchain fees were not a primary concern.
Source: Bank of Italy.According to the World Bank, the average global cost of remittances stands at 6.65%. In most corridors studied, stablecoins were found to be cheaper than this benchmark, but when compared to Wise, cost advantages were only evident in three out of seven comparable routes.
The authors suggested that the benefits of stablecoins would be more pronounced if they could be directly used for purchasing goods and services without needing to convert back to local currencies.
They also pointed out that restrictive regulatory environments do not diminish the demand for stablecoins, while overly stringent regulations complicate their use for retail customers.
It is noteworthy that in July, the total market capitalization of stablecoins fell by over $10 billion from its peak in May, dropping to approximately $310 billion. This decline marked the largest monthly decrease since the collapse of Terra in May 2022.