Stablecoins vs banks: BIS cost study

What happened

The Bank for International Settlements (BIS) has published a working paper that puts three ways of sending money across borders side by side: correspondent banks on the SWIFT network, fintech money transfer operators and stablecoins. Working Paper No 1385, "Competing rails for cross-border payments: banks, fintechs, and stablecoins", is by Wenxin Du, Catherine Huang and David Scharfstein and was presented at the BIS Annual Conference in June. Finextra summed up the result this week: fintechs top banks and stablecoins for cheap cross-border payments.

The numbers

According to Genfinity's summary of the paper, retail bank wires carry foreign exchange markups of roughly 200 to 400 basis points even on the most traded currency pairs, while wholesale spreads for major currencies are only a few basis points. One hundred basis points equal 1%. Fintech transfer services come in at about 40 to 150 basis points all-in, and their savings grow with the size of the transfer. On the stablecoin side, the currency leg alone averages close to zero for major currencies such as the euro, pound, Swiss franc and Singapore dollar.

The catch for stablecoins

The cheap currency leg is not the whole journey. Genfinity reports that the authors found exchanges acting much like correspondent banks: users still need on-ramps and off-ramps, trading fees of up to 60 basis points on most venues, and one combined route near 150 basis points. Liquidity is thin too. Daily euro-stablecoin volume on centralised exchanges is put at about $185 million, against roughly $2.7 trillion of daily euro turnover in traditional currency markets. Network fees also vary widely, from about $0.04 on some layer-2 networks to about $1.50 on Ethereum on average.

What is a stablecoin, and why does it matter here?

For anyone asking what a stablecoin is: it is a crypto token designed to track a currency, most often the US dollar, as USDT and USDC do. In capital-controlled corridors, the paper finds stablecoin rates often beat the official benchmark, but the authors link this to a "stablecoin access premium" created by those controls, not to better technology. They also warn that direct retail use exposes people to wallets, network fees and mistakes that cannot be reversed.

Why it matters for payments

Remittances remain expensive in many places: Genfinity cites World Bank data showing costs of 300 to 600 basis points in several high-cost corridors. The paper's message is that the cheapest route today is often a fintech money transfer app rather than a bank wire, and that stablecoin payments move intermediation to new players rather than removing it. The authors' practical takeaway favours hybrid designs that use stablecoins in the background while customers simply see money arrive.

What to watch next

Watch for responses from central banks and payment firms, new data on stablecoin liquidity in euro and other non-dollar pairs, and whether regulators treat hybrid stablecoin settlement differently from direct retail use.

What it means for Odix Pay users

Odix Pay is a payment app, not an exchange, and does not give investment advice. In the app you can send money to bank accounts in other countries, with the fee and rate shown before you confirm, and top up your Odix Pay balance with USDT or USDC. A virtual IBAN in your own name lets you receive SEPA euro transfers. Stablecoin transfers carry their own risks. Availability depends on your country, and fees are shown in the app. More stories in the Odix Pay newsroom.