Technology and economic shifts are changing the remittance industry. As more people adopt cryptocurrency, it’s changing how we send money across borders and providing new solutions to old problems in the traditional remittance system.

What are remittances

A remittance is a money sent by a person in one country to a person in another country, usually to support family members abroad. These transfers help families and, in turn, help develop country economies, contributing significantly to the global remittance market. Recent statistics show that 800 million people receive money from family members abroad, 1 in 10 people globally involved in remittances. The remittance market is $630 billion, according to the World Bank, and growing.

Remittances are more than just money. They are a big chunk of the national GDP in many developing countries. For example, remittances are 54% of Lebanon’s GDP, 44% of Tonga’s GDP, and 34% of Tajikistan’s GDP. For millions of families, these transfers are a lifeline for education, healthcare and daily living. These transfers are crucial for financial inclusion, enabling access to essential services and economic opportunities.

The United States is the largest source of remittance payments, with about $81 billion flowing out of the country in 2022, double the amount in 2002. This growth is due to increased global mobility and the key role migrant workers play in the global economy. But the current system is inefficient and costs and processing times are too long, we need innovation in how we transfer money globally.

What are crypto remittances?

Crypto remittances use cryptocurrencies to send money across borders without traditional financial intermediaries. This new method represents one of the most promising cryptocurrency use cases. Blockchain technology enables peer-to-peer transactions which can reduce costs and speed up transactions compared to traditional remittance channels.

Traditional remittance systems and their limitations

The current remittance system, dominated by financial intermediaries, has:

– Fees of 6.20% for sending $200, which includes high transaction fees, are twice the UN’s target rate for 2030

– Bank transfers even more, with fees of 12.09%

– Processing times of several days

– Limited access in areas with poor banking infrastructure

– Centralized operators like Western Union and MoneyGram

Crypto in remittances

How to send money to another country with crypto exchanges

You just need a device with the internet and a crypto wallet to send cryptocurrency. Users can buy cryptocurrency in their home country, send it to the recipient’s wallet and the recipient can then convert it back to their local currency through local exchanges or peer-to-peer markets.

No intermediaries and cost reduction

Cryptocurrencies enable peer-to-peer transfer without traditional banking intermediaries. This can reduce costs dramatically, as transaction fees for some crypto transfers cost as low as $1.50 for Bitcoin or $0.75 for Ethereum transactions, no matter how much you send.

Speed and efficiency

Crypto transactions, with quick processing times, are faster than traditional remittance systems, which can take days to process and, even during peak hours, take minutes to hours to complete. This speed is helpful for emergency transfers and time-sensitive payments, a significant advantage over traditional systems.

For the unbanked without a bank account

Cryptocurrency provides financial access to the 1.7 billion unbanked adults globally who don’t have traditional banking services. With just a mobile phone and internet, people can receive and send money internationally without a bank account. This is very transformative in developing regions where banking infrastructure is limited but mobile phone penetration is high. The technology enables previously excluded populations to be part of the global financial system, access emergency funds, and build financial security, promoting financial inclusion.

Crypto used in remittances

Cryptocurrencies used in remittances:

– Bitcoin (BTC) – Most widely accepted

– Ethereum (ETH) – For smart contracts

– Stablecoins (USDC, USDT) – For price stability (pegged to fiat)

Crypto to fiat currency and remittances

Crypto to fiat currency process:

1. Convert any local currency to crypto.
2. Send crypto to the recipient.
3. Convert crypto back to local currency through local exchanges.
4. Withdraw to a bank account or mobile money service.

Crypto in remittances examples

Real-world examples that are already working:

– Bitso processed $3.3 billion in remittances from the US to Mexico with fees under 1%.

– Venezuelan migrants sent $5 billion in remittances in 2023, 10% of which was in crypto.

– The UN Refugee Agency launched a blockchain payment solution using USDC for internally displaced persons in Ukraine.

Challenges and barriers to crypto adoption in remittances

Still many obstacles:

– Regulatory uncertainty across countries

– Crypto price volatility

– Technical barriers and digital literacy requirements

– Lack of awareness and education on crypto use

– Infrastructure in some regions

Conclusion

Cryptocurrency remittances are a solution to the long-standing problem of international money transfers. While regulatory uncertainty and technical barriers still exist, the potential to democratize global finance is becoming more evident. It’s not just about cost savings and faster transfers; it’s about global financial inclusion and economic empowerment.

Integrating blockchain with traditional financial systems will change the remittance landscape. As regulatory frameworks mature and user interfaces become more user-friendly, we expect more adoption in developing markets. The rise of central bank digital currencies (CBDCs) and cross-border payment protocols will accelerate this transformation.

The future of remittances will be a hybrid system where traditional and blockchain-based systems coexist and offer more choice and flexibility. This will lead to a more inclusive global financial system where sending money home will be as easy as sending a message – regardless of location, banking status, or economic circumstances.

To learn more about how cryptocurrency is evolving, read about the future of cryptocurrency and its path to mainstream adoption.

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Frequently Asked Questions

Q: What is a crypto remittance?

A: A crypto remittance is a fundamental redefinition of international money transfers. Unlike traditional systems that rely on a complex network of banks and money transfer operators, crypto remittances use blockchain to enable direct cross-border transfers between individuals. This eliminates multiple intermediaries and reduces costs and processing time. The distributed ledger provides immediate transaction verification, unprecedented transparency and security. Each transfer is recorded on a blockchain, a verifiable trail that traditional banking systems can’t match.

Q: How do you use crypto for remittance?

A: The process starts with the sender buying digital assets through a regulated exchange or peer-to-peer platform. After completing standard identity verification, they can send funds directly to the recipient’s crypto wallet using a unique address. Recipients then have options: they can hold the digital assets, convert them to local currency through exchanges or use emerging crypto-friendly payment services for everyday transactions. Modern platforms have made this process much simpler, with user-friendly interfaces that guide the user through each step. Some services now offer end-to-end solutions, handling both the initial purchase and final conversion to local currency.

Q: How many people use Bitcoin for remittances?

A: While global usage statistics are hard to come by due to the decentralized nature of blockchain, regional adoption is showing growth. Venezuela is a great example, where cryptocurrency channels handle almost 10% of the $5 billion remittance market. Bitso has facilitated over $3.3 billion in crypto remittances between the US and Mexico. Adoption is strong in regions with unstable currencies or limited banking infrastructure where crypto is a more reliable and accessible option. As platforms become more user-friendly and regulatory frameworks mature, analysts expect growth to accelerate in developing markets.

Q: What is a crypto-to-fiat remittance?

A: Crypto-to-fiat remittances connect traditional and digital financial systems by combining blockchain efficiency with everyday fiat currency. The process happens in three stages: first, conversion of local currency to digital assets through an exchange; second, fast blockchain transfer across borders; and third, conversion back to local currency in the recipient’s country. Modern platforms have simplified this process by integrating all stages into one interface and partnering with local financial institutions. This hybrid approach keeps the speed and cost benefits of blockchain while keeping the funds practical for everyday use.

Q: What is the most used crypto for payments?

A: The remittance space uses various digital assets, each for different purposes. Bitcoin is the bedrock of crypto payments due to its widespread acceptance and established infrastructure. But stablecoins like USDC and USDT have gained popularity by offering price stability – a must-have for remittance users who can’t afford market volatility. Ethereum has also become a popular option, especially in regions with developed crypto infrastructure, due to its smart contract capabilities and vast decentralized finance ecosystem. The choice often depends on local availability, transaction fees, and processing time required.