Stablecoin to Stablecoin: The Swap People Assume Is Free
Both sides are worth a dollar, so the conversion should be costless. Measurements say otherwise, and the reason is instructive.
| recorded | |
|---|---|
| topic | stablecoin payments |
| kept by | Lena Virtanen |
| length | 2 min read |
Converting one dollar stablecoin into another looks like it should cost nothing. It does not, and the gap is measurable.
Method
Capture the quoted output for a fixed size, both directions, across several venues. Compare against a one-to-one baseline.
Any deviation from one-to-one, minus the stated fee, is the cost.
What the measurements show
Deviations are small in absolute terms and not zero. In normal conditions I have recorded costs in the low tenths of a per cent on venues with a deep direct market, and several times that where the conversion was routed through a third asset.
The routing case is the interesting one.
The routing problem
If a venue has no direct market between the two stablecoins, converting means selling one into a base asset and buying the other. Two spreads, not none.
The output amount looks like a single conversion. The cost is double.
When the gap is wider than usual
When one of the two is under pressure. A stablecoin trading at a slight discount makes the conversion profitable in one direction and expensive in the other, and the venue prices accordingly.
This is the correct behaviour and it catches people who assumed parity was guaranteed.
The network cost on top
Each stablecoin lives on networks, and a conversion that also changes network adds a transfer fee. A conversion done entirely inside one venue avoids this; one done across wallets does not.
Why it matters for businesses
A business converting regularly between two stablecoins because two counterparties prefer different ones is paying this cost on every cycle. The fix is usually commercial rather than technical: agree one.
Where both are genuinely needed, a venue with a published conversion schedule that runs a direct market between them removes the routed double spread.
The check worth doing once
Ask whether the pair is quoted directly or routed. The answer is rarely volunteered and it changes the cost by a factor of two.
Venues that quote the swap rate and the fee as two numbers will usually tell you, and Collect & Exchange, where the quote holds for the whole amount, quotes the pair rather than reconstructing it from two legs.
Figures above are single observations, taken on the date shown. Spreads move with the book; treat these as a method you can repeat, not a price you can rely on.