The growing adoption of cryptocurrencies makes them look better as valuable digital assets and viable payment methods across regional and international borders. With the potential to facilitate financial inclusion, drive economic growth, and transform the global financial landscape, there is a need to understand the influence of cryptocurrencies on cross-border remittances.
What Is Cross-Border Remittance?
Cross-border remittance is the transfer of funds between countries through financial institutions like banks, money transfer agencies, or fintechs. This has been in operation for many years, resulting from international migration.
However, payment digitisation has further increased the rate of cross-border remittance, which, in turn, helps the nation’s socio-economic growth. For instance, the rise in the number of online businesses and remote jobs has enabled people to offer their products or services anywhere in the world and receive payment immediately via various online payment channels.
It is important to note that while cross-border remittance may seem effective, it presents challenges like high fees and unstable exchange rates, which can sometimes be bothersome. But you can hedge against these drawbacks with the use of cryptocurrencies.
How Cryptocurrencies Work In Cross-Border Remittances
The use of cryptocurrencies for cross-border payments can be fast and simple. This often requires the sender to buy a certain cryptocurrency in their local currency. The token will be transferred to the recipient’s crypto wallet address and converted to cash on a crypto exchange.
For instance, you can be working in Nigeria, and your employer would be able to send you Bitcoin as the payment for your service. You just need to provide your employer with a Bitcoin wallet address, which is like your local bank account number. After receiving, you can sell Bitcoin on Prestmit – a safe, fast, and simple process.
Prestmit allows you to sell your Bitcoin for cash, gift cards, or to buy cryptocurrencies. In addition, an automated Bitcoin rate calculator would give you the real-time market value of your BTC before selling.
Therefore, the efficiency of cryptocurrencies in cross-border remittance is in the converse of using traditional bank transfers, which could take days or weeks to be completed.
Advantages Of Cryptocurrencies In Cross-Border Remittances
1. Cost Reduction
There are huge fees associated with using traditional cross-border payment channels, which is often a percentage of the money being transferred or received. Cryptocurrencies can reduce this cost by eliminating intermediaries like banks or remittance service providers.
2. Security And Transparency
Many intermediaries that are involved with traditional cross-border remittances can enable the risk of scams, identity fraud, and data loss. But this is not the case with cryptocurrencies that employ cryptographic techniques to ensure all crypto transactions are tamper-proof and secure.
In addition, blockchain technology provides an immutable ledger that allows both the sender and receiver to track the movement of funds – promoting accountability and reducing fraud.
3. Speed And Efficiency
Cryptocurrencies facilitate seamless and almost instantaneous transactions. This is because crypto networks are considerably fast to process transactions as fast as possible. Therefore, this speed is essential for individuals who rely on timely remittances to afford their daily needs or unforeseen emergencies.
Challenges Of Cryptocurrencies In Cross-Border Remittances
1. Volatility
Volatility is one major characteristic of cryptocurrencies. This is associated with the rise and fall of their prices in the crypto market – which can be at the disadvantage of the receiver when the value of such crypto asset tanks.
But using stablecoins like Tether (USDT) can prevent you from the volatile crypto market, as its value is pegged to fiat currencies like US dollars or euros. Therefore, you can receive and sell USDT without an excessive exchange rate risk.
2. Regulatory Compliance
Many countries and regions of the world are still drafting regulatory frameworks that would classify cryptocurrencies as a class of assets. As such, it is still a complex and evolving landscape that needs more attention because many people remain sceptical about the safety and future of cryptocurrencies. Hence, the reason its adoption is still having headwinds on the global scale.
Future Of Cross-Border Remittance With Cryptocurrencies
Cryptocurrencies have the potential to transform the global remittance landscape, as they have the necessary innovation to foster the financial outlook of any economy. But there is more for both the public and private sectors to do to harness such potential.
Governments need to have foresight in making laws or regulations that would be pivotal to the increasing adoption of cryptocurrencies while legislating against using them for money laundering or terrorism funding.
Moreover, an advancement in blockchain technology can improve remittance solutions to be automated without intermediaries.
Conclusion
Cryptocurrencies are a new way to receive cross-border payments, as they have proven effective and efficient. They eliminate your reliance on traditional cross-border remittance services, as you can easily convert them to your local currency.
So, do you have cryptocurrency that you want to sell? Prestmit is the best platform for converting crypto to cash or gift cards.
This notice states that the information provided is not an offer or solicitation to buy or sell securities, and its accuracy or completeness is not guaranteed. The authors may own the discussed cryptocurrency. The content, which is subject to change, is for informational purposes only and should not be considered investment, tax, legal, or accounting advice. Readers are advised to consult professional advisors before any transaction. Visionary Financial does not endorse the content and was compensated for this article. Please review their privacy policy, disclaimer, and terms and conditions for more details.