How can you use cryptocurrencies to save money on remittances?

Cryptocurrency transactions, depending on the specific cryptocurrency chosen, can have lower fees compared to traditional services. There are also peer-to-peer marketplaces where you can buy and sell crypto directly with others, potentially reducing fees even further.

Trying to make it as simple as possible, cryptocurrencies are currencies/tokens created using digital technology to facilitate transactions online on the blockchain. Often these tokens facilitate transactions and contracts used in a project. For example, Filecoin, that is used to store data on the Blockchain, or ETH used for smart contracts

Cryptocurrencies are digital assets that operate independently of central authorities, offering secure and transparent transactions. Their decentralized nature reduces reliance on traditional banking systems, potentially lowering remittance costs and increasing efficiency. However, fluctuations in cryptocurrency value and regulatory uncertainties pose challenges to their widespread adoption for remittances.

When using cryptocurrency to do cross-bordet money transfers, it is best to send a stablecoin. What is a stablecoin? Unlike volatile "coins" like Bitcoin or Ethereum, stablecoins, as the name implies, are much more stable than their first cousin coins. US dollar-pegged stablecoins are USD substitutes, essentially USD on steroids, or frictionless USD. Web3 portals that allow cross-border money transfers are not here yet, but a small number of pilot programs have sprouted. One of these, limited in service from only four states and a single destination, is sendroks.com, which uses its own stable token to send. These portals allow users to pay in USD. Basically, senders buy the stablecoin which gets sent to the recipient wallet.

Party to party direct transaction system without government or bank involvement or interference and a separate storage of wealth

Cryptocurrencies work for remittances by enabling fast, low-cost, cross-border transfers without relying on traditional financial institutions. The sender purchases cryptocurrency via exchange/wallet and transfers it to the recipient's digital address. The transaction is securely recorded on a decentralized blockchain network, which validates and settles the transfer. The recipient can then convert the received cryptocurrency to their local currency through a crypto exchange or dedicated remittance platform. However, factors like cryptocurrency volatility and regulatory variations across jurisdictions should be considered when using it for remittances.

One thing that could be helpful is to not have the sender and the receiver have to go through the complexity of opening a crypto exchange account and then buying and selling the crypto token sent. There are now web3 portal pilots for cross-border money transfers. The user interface of these portals are very much like those for fiat remittance, like Remitly, Western Union, or Xoom. Xoom now allows sending the PayPal stablecoin PYUSD overseas.

Using cryptocurrencies for remittances involves selecting a suitable cryptocurrency, setting up a wallet and exchange account, purchasing cryptocurrency with local currency, transferring it to the recipient's wallet, and then converting it back to local currency. While offering potential cost savings and faster transactions, users must navigate exchange fees, network fees, and the recipient's ability to convert cryptocurrency to local currency.

We are already tested this model and it works very well. Specially for Indian immigrants. We don’t charge extra transfer fee or no more forex charges while converting fiat to crypto. We also give 0.5% cash back whenever you transfer funds to india.

One of the biggest unfairness in life today is that depending on where you are born (the one thing you have no control in your life) it determines what financial services you have access to. You can be as smart or passionate about financial services, but if you are born or live in Iran, North Korea, Syria, Libya, Cuba, Venezuela, etc then you are de facto cut off from global finance although you didn’t choose to be born/live there and you didn’t chose the governments in place who are driving those policies. This for me is a major reason why we need DeFi and crypto.

The biggest benefit is the lower fees when it comes to online transfers of cryptocurrencies. Being able to see transaction fees live, you can compare the fees for each chain that you choose to use, which allows you to select the cheapest way to transfer. The next one is how accessible it is and how international it is. With each person being able to use their exchange/wallet of choice and instantly being able to send it securely without having to worry about all the additional information usually required like account type, international address, bank account owner name etc.

The benefits of using cryptocurrencies for remittances include lower fees, faster transaction speeds, and increased accessibility. Cryptocurrencies eliminate intermediaries and currency conversion fees, enabling direct and instant transfers. Additionally, they offer accessibility to individuals without bank accounts or physical locations, allowing anyone with a smartphone and internet access to send and receive money globally.

The biggest challenge today in the crypto industry is the fiat banking system that is needed for on and off ramps. Most banks to not want to touch crypto for completely uneducated reasons that are probably better for another post but are mainly due to US correspondent banking. If as a business you decide to enter the crypto space, you need to be aware of such potential challenges.

Regulatory uncertainty and maintaining compliance with AML and KYC regulations are a challenge. Additional challenges include user adoption and education. User adoption is growing in some regions while other regions have banned cryptocurrency. For widespread adoption of crypto for remittances, education and infrastructure are required. Education on how to transfer crypto and how to spot a scam or fraud are needed.

A big barrier is lack of access to bank accounts on both sides of the transaction as an on- or off-ramp. Buying crypto (usually stablecoins) for remittances only costs a fraction of a percent on an exchange, and sending the money is nearly free on many blockchain networks. But it's the funding of the crypto exchange purchases via a bank account and ability to withdraw the crypto as local fiat that limit usage. Also consider that bank to bank remittances are already nearly free via traditional channels. The trick would be to go from cash or check to digital currency and back to local fiat on the other side without a bank, which is still very difficult today. And to do this in a way that requires low tech literacy on the receiving side.

My impression is that the speed of innovation and technology is way to fast for many people who don't have skills to use them. There is a need to step up with education and awareness raising as the risks are too high for many. Coming from a country known for high remittances, using cryptocurrencies may seem attractive but could be very dangerous.

The largest challenge relates to the link between crypto and traditional finance. Due to some countries not having regulations in place, or have a negative stance; it is often difficult to convert your cryptocurrency for use in your ordinary life. Finding an exchange that allows you to withdraw in the currency you want is a challenge. The actual transfer of money is easy since you only need a single address, however the risk comes in when the exchange/counterparty is unregulated and not reviewed. Similarly to the traditional banking system before measures were specifically put into place to prevent crisis situations, such as what happened during the Great Recession.

Never invest with the expectation of gains. If you want to use the currencies for the purposes of remittances, the process is the same as when you're choosing which bank to use. Check for reviews/reports, regulations, whistleblowing reports and ongoing lawsuits, etc. When you are doing the transfer, double/triple check the address and the relevant chain. Similar to a bank payment where you should be triple checking the bank account number

Getting started with cryptocurrencies for remittances requires thorough research and understanding of the crypto market. It's crucial to compare different cryptocurrencies, wallets, and exchanges to make informed decisions. Start with small transactions, communicate effectively with recipients, and be prepared for potential delays or losses by having a backup plan in place.

Right now everyone only knows cryptocurrency for the proposition of making money off the price of crypto tokens. That's a small part of the industry. Every token has a unique objective and if you spend a little time, you might find some amazing projects or problems that people are trying to solve. There's a reason why there is both ETH and BTC. BTC wanted to serve as a means of facilitating transactions. Whereas ETH wanted to serve as a means to build contracts and applications. Filecoin was designed to be used to store data, and ICP wanted to be the new backbone for the internet. There's a lot more cryptocurrencies than making a quick buck or transferring money

For my experience, to use cryptocurrencies to save money on remittances, you can follow these steps: 1.Choosing a Suitable Cryptocurrency. Selecting a cryptocurrency that is widely accepted and has lower transaction fees and faster transaction times 2.Choose a correct exchange platform. Purchasing the chosen cryptocurrency from a reputable cryptocurrency exchange platform. 3.Recipient Conversion.If the recipient prefers to receive funds in their local fiat currency, they can convert the received cryptocurrency into fiat currency using a cryptocurrency exchange platform or peer-to-peer (P2P) exchange service.

You can love Bitcoin or you can hate Bitcoin. You can love cryptocurrencies or you can hate cryptocurrencies. Its irrelevant. But you have a moral (and in many cases a fiduciary) duty to at least try to understand it. And the best way to learn, is to spend couple of minutes to read about the topic and to experiment using actual small amounts of crypto. Then you can make a judgement.