The Stablecoin Sandwich and Why Remittances Stay Expensive
Maria in Queens sends $100 to her mother in Manila every week. By the time it arrives, it is closer to $94. That missing $6 is not a service she chose to pay for—it is the cost of what I call the stablecoin sandwich.
Multiply that by millions of families and it adds up to nearly $50 billion a year drained from the world’s poorest households.
The Stablecoin Sandwich
When you send USDC from New York to Manila, it looks like one transaction. In reality, your money passes through three layers:
- Top layer: Dollars sit at a custody bank
- Middle layer: A stablecoin issuer mints USDC tokens
- Bottom layer: Local exchangers convert USDC back to pesos
Each layer takes a bite. Banks charge custody fees. Issuers cover operational costs. Local exchangers capture spreads.
That is why global remittances, worth $905B in 2024 (World Bank), carry average costs of 6.4% on $200 transfers. Families lose about $50B each year in fees and hidden FX spreads.
Even when fintechs run hawala-style networks, the sandwich does not disappear. They just absorb the layers internally and pass costs back to users.
And with the GENIUS Act prohibiting issuers from earning yield on reserves, stablecoin providers are now forced to charge explicit fees on top.
The Human Cost
This is not just inefficiency—it is survival money being extracted.
- A nanny in Manila waiting for tuition money loses $12 to conversion spreads
- A vendor in Lagos converting USDC to naira watches 8% vanish
- Families sending $200 for medicine lose $13 before it ever arrives
The poorest pay the most. What looks like basis points in New York is a week’s worth of meals in Buenos Aires.
The Real Cost Driver: FX
Custody layers matter, but the biggest bite comes from foreign exchange.
When you send USD to Manila, someone needs pesos on the other side. Today that liquidity is controlled by banks and OTC desks, often charging 2–5% spreads depending on the corridor.
Tomorrow, on-chain AMMs and market makers could compete in real time, driving spreads down from percentages to fractions of a percent. Instead of three banks controlling a corridor, hundreds of liquidity providers could fight for every trade.
The result: remittance costs falling from dollars to cents.
Toward an Open-Faced Sandwich
Two shifts could transform this market:
- Tokenized deposits: Custody banks issue digital dollars directly, eliminating extra issuer layers
- On-chain FX markets: Competing liquidity providers compress spreads and replace monopolistic banks
JPMorgan Coin already shows how one-layer systems can cut fees from dollars to cents. Uniswap shows how AMMs can compress spreads in crypto markets. When both converge in real-world corridors, the remittance market could finally move at internet speed and cost.
The stablecoin sandwich is profitable for intermediaries but devastating for families.
Will banks launch deposit tokens first, or will FX markets move on-chain faster?