A new working paper from the Bank for International Settlements compares the cost of international transfers through banks, firms such as Wise and Remitly, and stablecoins. For a 10,000 dollar transfer from the US to developed countries, fintechs cost about 40 to 60 dollars, while banks charge a currency margin of roughly 200 to 470 basis points before wire fees. Stablecoins are generally not cheaper, because of exchange, withdrawal and cash-out fees. In some emerging markets with capital controls they offer a better rate, which the authors attribute to regulatory distortions.

What it means: The study puts numbers on a debate that is often conducted in slogans. Stablecoins are frequently presented as the cheap, fast way to make international payments, but when the whole route is measured, from the bank account to the recipient, the individual fees eat up the advantage. Fintechs built specifically for remittances, by contrast, have already cut costs sharply, while banks hide much of their charge in the exchange rate, where customers rarely notice it. For Greek small and medium-sized businesses paying suppliers or customers outside the euro area, the practical conclusion is to compare the total cost and not just the visible fee. The difference on a transfer of a few thousand euros can be several times what appears on the bank's statement. For payments inside the euro area, SEPA instant transfers are already cheap, so the issue mainly concerns dollars, pounds and other currencies. The finding on markets with capital controls is a reminder that the stablecoin edge there often comes from sidestepping rules.

Read the original on Bank for International Settlements

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