The Banca d’Italia has published a report on digital currency asking the question: Are Stablecoins Efficient for Remittances?
The goal was to determine if stablecoins provided an improvement over more traditional payments and transfers regarding cost and speed.
The paper reviews transfers of $200 in USDC across ten different countries using both global and local crypto exchanges.
In regard to cost, the paper claims there were no systemic advantages, as total cost varied from 0.30% to nearly 9% of the amount transferred. On-chain transfers fared better with consistently cheap and marginal (average ~0.4%, as low as 0.01%). On-ramp and off-ramp differences caused most of the friction and fees.
The report says that while some corridors were cheap, others were expensive. While stablecoins were often cheaper to transfer when compared to World Bank RPW country averages, when compared to Wise, the results were mixed.
Regarding transfer speed, onchain settlement was fast, but end-to-end times varied, especially when you add local payment infrastructure.
In brief, the paper was not very excited about stablecoins and the potential value to transfers and payments while worrying about adding AML/CFT risk to the process.
Local instant payment systems can help, and direct spending via stablecoins could drive value for users.
In reviewing the report, Movement CEO Torab Torabi says the real friction in cross-border payments comes from the legacy financial infrastructure connecting to it.
“While some are positioning the Bank of Italy findings in a negative light for stablecoins, this is the data set our industry needed. The Bank of Italy’s numbers show the blockchain leg of these transfers cost a fraction of a percent, while exchange fees, FX spreads, and banking rails did almost all the damage in taking money from the end user. That’s not a stablecoin problem. It’s proof the bottleneck was never block times or throughput, but rather the last mile of compliant on/off-ramps and integration with domestic payment systems. The settlement layer has proven to work from a central bank across ten corridors. If the industry takes this seriously, the next wave of cost reduction won’t come from faster chains, it’ll come from fixing the incumbent systems around them that are causing the most friction.”