The cryptocurrency revolution is sweeping the world and it is set to revolutionize many aspects of finance. One of the areas set to evolve with the advent of crypto currencies is the money transfer and remittance sector. This sector is worth approximately $500 billion per annum and remittances from developed nations are a major driver of the economy in developing countries.
Traditionally, remittances are carried out by Money Transfer Operators(MTOs) both online and offline. This sector has been long dominated by companies such as Western Union, World Remit, MoneyGram and Paypal. Money Transfer Operators have stringent Know Your Customer(KYC) requirements before one is allowed to transact with them. Transactions take several days to be processed and they charge a percentage of the money you send. Due to these limitations, more people are opting for crypto-based remittances.
Transferring money using cryptocurrencies is typically very fast because intermediaries are eliminated. Since middle men are avoided, you also get to avoid a lot of the fees and commissions charged. Cryptocurrency transfers can be initiated whenever and wherever you are. When using some of the traditional remittance service providers, you would have had to visit an office to initiate the transfer. Crypto money transfer also frees you from government restrictions such as sanctions on sending money to some countries.
As convenient as crypto based money transfers are, they also come with some disadvantages. Cryptocurrency is famously volatile. Picking a cryptocurrency in which to send money is a difficult choice. It can be costly to send small amounts of money through Bitcoin, the most widely adopted cryptocurrency. This is because Bitcoin’s fees are calculated on a per-byte basis, not as a percentage. Litecoin is cheaper but can be less liquid in some countries. One of the best ways to remit money abroad is by using stablecoins which are more stable since they are pegged to fiat currencies.
Learning to transact cryptocurrency has a steep learning curve which can intimidate some beginners. For this reason, there are several startups that help users facilitate remittances even if they do not understand the underlying technology. Popular ones include Circle, Wirex and Bitpesa.
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This page was last updated on July 6, 2023.
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