Cryptocurrencies aren’t just a way to invest and speculate. They’re used across the world as a way to carry out international money transfers and remittances.
An increasing number of people in developing economies are turning to digital currencies like Bitcoin and Ripple as a way around some of the financial problems they face. These include things like high inflation, government corruption, and the fact that two billion people in the world are unbanked.
Countries like Venezuela, Nigeria, and Zimbabwe that struggle with such problems are making use of cryptocurrency on a large scale as a way of avoiding an unreliable banking system. It makes it easier to receive money from relatives abroad and store savings.
Sending money overseas can be time-consuming and expensive if you rely on traditional methods like banks and PayPal, and cryptocurrencies could make the process a whole lot easier.
How does it work?
Currently, lots of international transfers are done through services like banks, Western Union, and PayPal.
These methods each have their own advantages, but also come with a lot of drawbacks. They impose fees on customers for cross-border transactions and currency conversions, and the average transfer takes three to five days to complete.
The average cost of global remittances is now 7.09% — which can really add up over time if you make these kinds of transfers on a regular basis.
Cryptocurrency is different, because it’s a global, decentralized system. This means there is no need for cross-border fees, because cryptocurrencies don’t recognize international borders. It also removes the issue of currency conversion, because it’s all the same currency (a Bitcoin in China is a Bitcoin in Germany).
It’s straightforward — you simply buy some cryptocurrency like Bitcoin, and use a cryptocurrency wallet or other software to send the money directly to another person or company located in another country.
Because the system is so global and decentralized, it’s possible to complete transactions in just a few seconds. This time can vary a little depending on a number of factors, but in general the crypto industry is getting better at making this happen.
Cryptocurrency is also secure. It’s completely anonymous, and the blockchain technology which underlies these currencies helps reduce the risk of fraud and corruption. It’s easy to record and track transactions, and any foul play is easy to notice.
Another impressive thing about cryptocurrency is that it isn’t tied to any banking system, which makes it resistant to a lot of the issues facing fiat currency. These include inflation, collapse of major banks, financial crises, and corruption.
With so much potential, there’s clearly a big market for this kind of technology.
Who’s making it happen?
There are quite a few companies intent on exploiting this gap in the market. One recent big example is that of MoneyGram. The Dallas-based money transfer company made an alliance with cryptocurrency Ripple as part of a new international transfer service.
They believe it will help increase efficiency, security, and speed of transactions, while reducing costs.
Other leading companies like WorldFirst could also look into this opportunity to get ahead of the competition. There’s a ton of potential here for companies to ride a new technological wave and bring massive benefits to the millions of people who rely on international remittances.
Will cryptocurrency ever replace traditional methods of sending money abroad?
It’s hard to say whether cryptocurrencies will ever replace methods like banking. Companies like PayPal haven’t been around for too long, however, and thirty years ago virtually nobody could have predicted the use of electronic, online payments at all.
Technology changes rapidly, and cryptocurrencies seem to be well-suited to sending money overseas. Ultimately, it depends on acceptance by mainstream society, and the building of solid and reliable platforms.
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