Stablecoin cross-border payments now have a detailed cost study from inside the central banking system. The Bank for International Settlements published Working Paper No. 1385 in October 2026. Wenxin Du, Catherine Huang, and David Scharfstein of Harvard Business School wrote it. They presented the work at the 25th BIS Annual Conference in Basel in June. The paper compares three payment rails on one cost basis: correspondent banks using SWIFT, fintech money transfer operators, and stablecoins. Its headline result cuts against both camps. Stablecoins price well on the foreign exchange leg, yet the authors call them “not a panacea.”
The Bank for International Settlements today published a speech from Singapore’s central bank (MAS) referencing Global Layer One (GL1). The initiative’s June 2026 technical documentation features Chainlink’s compliance technology. GL1 participants include JPMorgan, HSBC, Standard Chartered, MUFG, Banque de France and MAS. MAS envisions a network of networks connecting distributed ledgers and traditional financial infrastructure to support regulated cross-border transactions in tokenized assets. MAS reports that a growing number of major DLT networks are adopting GL1 standards. The initiative’s white paper identifies Chainlink’s Automated Compliance Engine (ACE) as an implementation example, including its Policy Manager, Compliance Rules Engine and Cross-Chain Identity (CCID) capabilities.
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Why Retail Cross-Border Payments Cost So Much
The authors start with a puzzle. Wholesale FX markets for major currencies trade with bid-ask spreads of only a few basis points. However, retail bank wires carry FX markups of roughly 200 to 400 basis points, even for the most liquid currency pairs. The researchers conclude that market depth does not explain the gap. Instead, the payment architecture drives the cost.
Traditional transfers pass through chains of correspondent banks that hold nostro and vostro accounts for one another. Each bank in the chain can charge a handling fee or an FX spread. Banks must also hold liquidity in many currencies and repeat compliance checks at every hop. SWIFT carries the payment messages but does not settle the funds. As a result, small transfers absorb fixed costs that large transfers spread more thinly.
Fintech operators such as Wise and Remitly changed that picture. They hold local accounts, net opposing customer flows internally, and settle only the leftover imbalance. The paper finds their all-in costs range from about 40 to 150 basis points, with savings that grow as transfer size rises. Importantly, the authors credit fintechs with the largest cost compression so far. Stablecoins enter a market that fintechs already improved.
How the Stablecoin Sandwich Works
The paper defines the “stablecoin sandwich” as three steps. A sender converts local currency into a dollar stablecoin such as USDC or USDT. Next, the stablecoin moves across a public blockchain, and the paper names Ethereum, Tron, and Solana as the main networks. Finally, the recipient converts the tokens back into local currency, usually through a centralized exchange. No correspondent bank or SWIFT message touches the transfer itself.
Fintechs can also run this structure behind the scenes. Felix Pago offers the clearest example in the paper. The company lets U.S. residents send money to Latin America through WhatsApp. In the U.S.–Mexico corridor, it runs a USD–MXN–USDC sandwich in the backend. Customers see a simple app experience and never manage a wallet.
The authors also describe a “double-decker” variant. It swaps a dollar stablecoin for a foreign-currency stablecoin, such as USDC for EURC, on a decentralized exchange. That design moves the FX trade onchain. However, most stablecoins track the dollar, so the paper treats this version as limited for now.
The FX Leg Approaches Wholesale Rates
The paper measures stablecoin-implied exchange rates against Bloomberg BFIX benchmarks. For major currencies, including the euro, pound, Swiss franc, and Singapore dollar, the FX cost averages close to zero. In other words, the stablecoin leg trades near the wholesale rate when liquidity exists. That compares favorably with the 200 to 400 basis point markups at large banks.
Emerging markets show an even stranger result. In corridors with capital controls, stablecoin-implied rates often beat the official benchmark for outbound transfers. World Bank data show remittance costs of 300 to 600 basis points in several high-cost corridors. Meanwhile, the stablecoin FX cost in those same corridors sits near zero or below. The authors attribute this to a “stablecoin access premium,” because local users pay extra for dollar exposure.
Crucially, the researchers warn against reading this as a technology win. They write that these advantages come from capital control distortions, not technological efficiency. Furthermore, liquidity remains thin. The euro pairing trades about $185 million daily on centralized exchanges and roughly $15 million on decentralized ones. In contrast, daily euro turnover in traditional FX markets reaches about $2.7 trillion.
Blockchain Fees Barely Register
The second finding concerns network costs. The authors use Token Terminal data covering April 2023 to April 2026. Tron averages $0.06 per transaction, and Ethereum averages $1.50. Layer 2 networks such as Base and Arbitrum average about $0.04. Their worked example, a USDC transfer on Ethereum from Coinbase to Kraken, cost about $0.19 in gas.
The paper concludes that these fees are economically negligible relative to typical transfer sizes. Notably, the data table does not break out Solana, although the text names it as a major network. The authors add one caveat. A double-decker sandwich needs several onchain steps, and gas can then add a visible share of a small payment.
Where Intermediation Returns
Cheap blockchains do not make the whole payment cheap. The Coinbase to Kraken example carried a 1 percent trading fee and a fixed one-euro SEPA withdrawal fee. Centralized exchanges charge up to 60 basis points on most venues, and one major exchange charges 100 basis points to low-volume traders. A related presentation put the combined Coinbase and Kraken route near 150 basis points. Therefore, small transfers feel the fixed fees most.
The authors argue that exchanges perform the same job as correspondent banks. They add hops for on-ramping and off-ramping, and they reintroduce counterparty risk. Peer-to-peer venues and crypto-focused banks fill the same role elsewhere. In the paper’s words, stablecoin rails reallocate intermediation across institutions rather than remove it.
Wise’s own unit economics support this view. For a GBP-to-EUR transfer, Wise estimates £0.24 in fixed costs per transfer. Customer support accounts for £0.11, and compliance accounts for £0.06. The payment rail itself costs only £0.02. Consequently, a cheaper rail attacks the smallest slice of the bill.
What This Means for Payments
The BIS study does not dismiss stablecoins. It shows that they can match wholesale FX pricing on major pairs and move value for pennies. It also shows that fintechs already deliver strong pricing and a better user experience. Retail users face wallets, gas tokens, and irreversible mistakes when they use stablecoin rails directly. Large institutional transfers also face the liquidity limits described above.
The practical lesson favors hybrid designs. Felix Pago hides the blockchain from the customer while using it for settlement. That model keeps the speed and low network cost while handling compliance and support in a familiar interface. For payments companies, the competitive question shifts from which rail is cheapest to who runs the on-ramps, the liquidity, and the compliance. The paper suggests that those layers will decide how much of the savings reach the sender.
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