Sending remittances with cryptocurrencies: benefits and risks
Remittances, or money transfers made by individuals to their friends and family members in other countries, are a vital source of income for many households worldwide. According to the World Bank, global remittances reached a record high of $794 billion in 2022, and are expected to grow even further in the coming years. However, traditional remittance methods can be expensive, slow, and complicated, making it challenging for people to access the funds they need. This is where cryptocurrencies come in.
Benefits of Sending Remittances Via Crypto
There are many significant benefits to end users who choose to send remittances using cryptocurrencies, including:
- Lower Fees
One of the most significant advantages of using cryptocurrencies for remittances is lower fees. Traditional remittance methods often involve intermediaries, such as banks and money transfer companies, that charge high fees for their services. Cryptocurrencies, on the other hand, bypass these intermediaries and enable direct peer-to-peer transactions. This can result in lower transaction fees, allowing more of the funds to reach the intended recipient.
- Faster Transfers
Another advantage of using cryptocurrencies for remittances is faster transfer times. Traditional remittance methods can take several days to process, while cryptocurrencies can be sent and received almost instantly. This is because cryptocurrency transactions are processed on decentralized networks, rather than through centralized intermediaries, allowing for faster processing times.
- Increased Transparency
Cryptocurrencies can also provide increased transparency for remittance transactions. Cryptocurrency transactions are recorded on public ledgers, such as the blockchain, making it easy to trace the flow of funds. This can help prevent fraud and increase trust between the sender and recipient.
- Reduced Risk of Fraud
Cryptocurrencies use advanced encryption techniques to secure transactions, making them less vulnerable to fraud and theft than traditional remittance methods. Cryptocurrencies are also decentralized, meaning that there is no central authority that can manipulate or block transactions.
- Access to Underserved Regions
Cryptocurrencies can provide a means for individuals in underserved regions to receive remittances. In many cases, people in these regions lack access to traditional banking services, making it difficult to receive remittances through traditional channels. Cryptocurrencies can provide a way for these individuals to receive funds without the need for a bank account.
- Greater Financial Control
Finally, cryptocurrencies can provide greater financial control to both senders and receivers of remittances. By using cryptocurrencies, individuals can manage their funds without relying on intermediaries or third parties. This can provide greater control over their finances, reducing the risk of fraud and giving them greater financial independence.
Risks of Sending Remittances with Cryptocurrencies
While there are several benefits to using cryptocurrencies for remittances, there are also some risks to consider. Cryptocurrencies are still a relatively new and untested technology, and there is a risk of price volatility and scams. It's essential to research and use reputable platforms and providers when sending remittances with cryptocurrencies.
Additionally, exchanging fiat for crypto (and vice versa) can be an obstacle for end users, and having to visit multiple services to exchange and transfer increases exposure to potential bad actors or scams.
For fintechs that want to offer their users the ability to send remittances with cryptocurrencies, it can be difficult to navigate the technological and compliance complexities of blockchain-powered transfers. Conduit helps builders overcome these challenges with an end-to-end development platform that allows for completely custom solutions embedding invisibly into their apps. Conduit's API empowers your end users to send remittances with lower fees, faster transfer times, increased transparency and reduced risk of fraud.
Learn more about the Conduit platform for remittances here.