Remittances, or money sent from one country to another, are a vital lifeline for millions of people worldwide. In 2022, global remittances totalled $626 billion, according to the World Bank. However, traditional remittance methods can be expensive and time-consuming, with fees often reaching 10% or more.
Cryptocurrency offers a new and potentially more efficient way to send remittances. Crypto transactions are typically much faster and cheaper than traditional methods, and they can be sent to anyone with a cryptocurrency wallet, regardless of their location.
One of the biggest advantages of cryptocurrency remittances is their low cost. Crypto transactions typically incur fees of less than 1%, which is significantly lower than the fees charged by traditional remittance services.
Another advantage of cryptocurrency remittances is their speed. Crypto transactions can be settled in minutes, compared to days or even weeks for traditional remittances. This is especially important for people who need to send money urgently to family or friends in need.
Cryptocurrency remittances are also more accessible than traditional methods. Anyone with a cryptocurrency wallet can send and receive remittances, regardless of whether they have a bank account or not. This is especially beneficial for people in developing countries, where a significant portion of the population is unbanked or underbanked.
While cryptocurrency remittances offer a number of advantages over traditional methods, there are also some challenges that need to be addressed. One challenge is the volatility of cryptocurrencies. The value of cryptocurrencies can fluctuate wildly, which can make it difficult to budget for and predict the cost of remittances.
Another challenge is the lack of regulation in the cryptocurrency industry. This can make it difficult to find reputable cryptocurrency remittance services and can also put users at risk of fraud.
Despite these challenges, cryptocurrency is rapidly gaining traction as a remittance method. A number of new cryptocurrency remittance services are emerging, and many traditional remittance providers are beginning to offer cryptocurrency options.
In April 2023, Strike, a Bitcoin-based payments company, launched a new service called Send Globally. Send Globally allows users to send Bitcoin to over 200 countries for a fee of just $0.01 per transaction.
This launch marks a significant step forward for cryptocurrency remittances, as it makes it possible to send Bitcoin to almost anywhere in the world for a very low fee.
One example of how cryptocurrency is being used for remittances is in El Salvador. In September 2021, El Salvador became the first country in the world to adopt Bitcoin as legal tender.
Since then, cryptocurrency remittances to El Salvador have increased significantly. In 2021, cryptocurrency remittances to El Salvador totalled $42 million, up from just $1.5 million in 2020.
The increase in cryptocurrency remittances to El Salvador has had a positive impact on the country’s economy. It has helped to reduce the cost of remittances, and it has also boosted economic activity.
Cryptocurrency offers a number of advantages over traditional remittance methods, such as lower cost, faster speed, and greater accessibility. However, there are also some challenges that need to be addressed, such as the volatility of cryptocurrencies and the lack of regulation in the cryptocurrency industry. Despite these challenges, cryptocurrency is rapidly gaining traction as a remittance method. A number of new cryptocurrency remittance services are emerging, and many traditional remittance providers are beginning to offer cryptocurrency options.
As cryptocurrency adoption continues to grow, it is likely that cryptocurrency remittances will play an increasingly important role in the global financial system.