The Economics of Using Stablecoins

Case Study: Sending Money from USA to the Philippines

Introduction

Sending money internationally, such as from the US to the Philippines, often involves high costs and slow processing times. Stablecoins, specifically USDC-SPL—Circle’s USD Coin issued on the Solana blockchain, leveraging Solana’s high-speed, low-cost infrastructure for near-instant transfers with minimal fees—offer a faster, more cost-effective alternative. By comparing traditional methods (Money-Center Bank, PayPal) with stablecoin platforms (Coinbase, Kraken), we can explore how banks profit from exchange rate spreads, while stablecoin costs stem from fiat onramps and offramps—and how staying in stablecoins can unlock significant savings.

Cost Comparison

Here’s a breakdown of the total fees and conversion losses for sending $2,000,000 PHP ($35,714 USD) from the US to the Philippines, with a $15 wire receipt fee for Money-Center Bank (Coinbase and Kraken send directly to wallets, avoiding this fee):

Note: Paypal base fees are a function of the amount.

Transfer Timing: A Hidden Cost

Speed is a critical factor in cross-border transfers. Traditional methods like Money-Center Banks and PayPal typically take 1–5 business days for funds to reach the recipient in the Philippines, versus seconds for USDC-SPL. While the speed of funds transfer is convenient, it is also a hidden cost. Multi-day settlement has real costs. The intermediaries make money on your money in the form of interest on the float. If you are the recipient of the funds, you also have an opportunity cost because you could be staking those stablecoins earning a 4-7% Annual Percentage Yield (APY). Float and opportunity cost are two sides of the same coin depending upon your role.

Traditional Transfers: Banks and PayPal

Banks and PayPal profit through unfavorable exchange rates, fees, and float although I don’t calculate the float below:

• Money-Center Bank (Wire) charges a $25 base fee and a $15 wire receipt fee, with a 54.5 PHP/USD rate (below the market rate of 56 PHP/USD). This spread results in $1,023 in total fees and conversion losses.
• PayPal has a high base fee ($279.44 a percentage of the amount sent) and the worst conversion rate (53.44 PHP/USD), leading to $1,988 in costs, making it the most expensive option.

These methods embed hidden fees in the exchange rate spread and suffer from slow processing times, inflating costs and delaying access to funds.

Stablecoins: USDC-SPL

Stablecoin transfers using USDC-SPL are faster and more transparent:

• Coinbase (ACH/Solana) uses a market-aligned rate (56 PHP/USD), a negligible base fee ($0.01), a 1% purchase fee, and a $268 cashout fee, totaling $626. Funds are sent directly to the recipient’s wallet, avoiding the $15 wire receipt fee.
• Kraken (ACH/Solana) is the cheapest, with a 0.17% purchase fee and $268 cashout fee, totaling $329. Like Coinbase, it sends funds to wallets, bypassing the wire fee.

Solana’s blockchain enables near-instant transfers with transaction fees as low as $0.01, making the transfer itself virtually free. Costs arise when converting USD to USDC-SPL (onramp) and USDC-SPL to PHP (offramp).

The Economics of Stablecoins

• Bank Profits vs. Stablecoin Costs: Banks and PayPal rely on exchange rate spreads, which are opaque and costly. Stablecoin platforms like Coinbase and Kraken offer better rates, but fiat on/offramp fees drive their costs. Kraken’s low 0.17% purchase fee makes it the most economical at $329.
• Solana’s Speed and Efficiency: USDC-SPL transfers cost just $0.01 and settle in seconds, far surpassing the multi-day delays of traditional systems.
• Fiat Conversion Costs: It’s costly to enter and exit fiat, but if you stay in stablecoins, the economics are great. Converting USD to USDC-SPL and USDC-SPL to PHP accounts for essentially the entire cost of using stablecoins ($626 for Coinbase, $329 for Kraken). If recipients can spend USDC-SPL directly, these fees vanish.
• Future Cost Reductions:
  • Lower Maker Fees: Banks or stablecoin issuers like Circle could reduce onramp fees to attract users, as they earn 4% on USDC held in treasuries (more on this in a future post). Competition among exchanges could further lower fees.
  • Direct Stablecoin Use: If more merchants and apps accept USDC-SPL, users can avoid fiat conversions. Payment processors like Stripe offer discounted fees for stablecoin transactions, allowing merchants to keep USDC-SPL for expenses, bypassing offramp costs.
  • Crypto-to-Crypto Conversion: For those avoiding fiat, converting USDC-SPL to cryptocurrencies like Bitcoin on a Decentralized Exchange (DEX) costs less than $1 on Solana, ideal for recipients who want to invest.

The Path Forward

Stablecoins like USDC-SPL are faster and cheaper than traditional transfers, with Kraken costing just $329 and delivering funds in seconds. As fiat conversion needs decrease, costs could drop further:

• More Stablecoin Apps: Widespread adoption of apps for spending and receiving USDC-SPL would eliminate offramp fees.
• Merchant Incentives: Stripe’s lower fees for stablecoin transactions could encourage merchants to hold USDC-SPL, reducing conversion costs.
• Regulatory Clarity: Users should choose trusted platforms like Coinbase or Kraken and stay informed about Philippine regulations, as stablecoins operate in a less regulated space.

Conclusion

For sending money from the US to the Philippines, USDC-SPL on Kraken offers the lowest cost at $329 and near-instant transfers. Alternatives are significantly more expensive: Money-Center Bank costs $1,023 (211% more than Kraken), Coinbase costs $626 (90% more), and PayPal costs $1,988 (504% more). While entering and exiting fiat is costly, staying in stablecoins like USDC-SPL delivers great economics. As competition lowers fees, merchants adopt stablecoin payments, and DEXs enable cheap crypto conversions, USDC-SPL will become an even more attractive solution for global remittances.