Stablecoins face high conversion costs in international remittances

Stablecoins are increasingly used for international remittances, offering the ability to move digital tokens, typically pegged to the US dollar, across blockchain networks in seconds. While these transfers can be convenient for users already integrated into cryptocurrency ecosystems, they present significant challenges for recipients who need to convert digital assets into local fiat currency for daily expenses like rent.

Research by the Bank of Italy highlights that while the blockchain movement of a token may be inexpensive, the surrounding ecosystem of transactions can be costly. Users often face hidden expenses through unfavorable exchange rates or explicit fees when converting tokens into local currencies, such as the Brazilian real. Consequently, a transfer that appears cheap on the surface may result in less money being received by the household due to the costs associated with cashing out.