Statistics show that the cost to convert stablecoins into dollars is most expensive in Africa.

Africa was the region with the greatest median spreads between stablecoin and fiat in January. This data is based on observations made by Borderless.xyz. The company monitors 66 currency channels, covering nearly 94,000 rate measurements.

The median regional spread was about 3 percent or 299 basis points. compared In Asia, the conversion costs ranged from 0.07% to 0.13%. The conversion cost in Africa varied from 1.5% in South Africa up to 19.5% in Botswana. 

Measures of data “spreads,” Or the difference in price between the provider’s sell and buy rate on a fiat-to-stablecoin pair. The spread is the same as a traditional bid-ask in a market. 

These findings indicate that although stablecoins have been promoted in the past as an affordable alternative to traditional remittance systems, they are actually more expensive. The actual costs of these products vary greatly across African markets. They also appear to be closely related to liquidity and competition among local providers. 

Price gaps caused by Competition

In general, Borderless.xyz discovered that conversion costs ranged from around 1.5% to about 4% in markets with multiple competing providers. When there was only one supplier, conversion costs were often higher than 13%. 

Botswana’s conversion cost was the highest in January (19.4%), though prices began to improve later in the year. Congo had a cost of over 13%. South Africa’s foreign exchange rate is more competitive, and its costs are only about 1.5%. 

According to the report, these differences were primarily caused by local conditions of markets, like liquidity and competition. They are not due to blockchain technology. The conversion cost was closer to average for countries that have multiple providers. 

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Stablecoins versus traditional foreign exchange

This report compares the stablecoin rates with interbank exchange rates to measure what they call “the stability of currency”. “TradFi premium.”

This indicator shows whether mid-market stablecoin rate is cheaper or expensive compared to traditional FX. 

Across 33 currencies, the difference between the stablecoin and mid-market exchange rates is about 5 basis point, or 0.05%. These two rates are essentially in sync.

The median difference in Africa was 119 basis point, which is about 1.2%. However, this varied widely by country.

Vera Songwe, an economist from the World Economic Forum Davos, said on Jan. 24 that stablecoins were a good idea. helping reduce remittance costs across AfricaTraditional transfer services charge around $6 for every $100 that is sent.

These new figures provide context. They suggest that stablecoins may offer greater speed of settlement, and even potential savings over legacy services. However, conversion costs for specific corridors still remain high.