Cryptocurrency: A Cross-Border Money Transfer Solution?
Making international remittances fair and simple was among the first use cases invented for Bitcoin. Even though the initial concept of low fees and high-speed transactions is now threatened by the increased load on the network and complete absence of any consensus regarding the scalability issue, bitcoin remains a preferable solution for those willing to send money abroad without any involvement of banks and payments processors.
Still, cryptocurrency payments lack the simplicity of traditional payment mechanisms like plastic cards. When one wishes to send money abroad via international remittances services, they don’t have to learn to work with cryptocurrency exchange services. Even though most of them try to offer a user-friendly interface, they mostly focus on traders, not those wishing to exchange their fiat for crypto and then forget the experience as soon as possible. In any case, dealing with cryptocurrency transfers on your own implies many more steps than a card-to-card transfer.
The relative complexity of dealing with bitcoin has urged numerous startups and companies to develop solutions that could make the entire process simple even for rookie cryptocurrency users.
There are numerous solutions that seek to facilitate money remittances for both international and domestic purposes.
One of the world’s most promising markets in this regard is Africa where most people have no access to bank accounts and mostly rely on cellphones. There are numerous services like BitPesa or Bitwala that offer instant remittances of fiat currencies. Such startups are mostly based on concealing cryptocurrency from users. The user’s fiat currency is invisibly converted into BTC, transmitted to a different user, and then again invisibly converted back to fiat. For instance, BitPesa exchanges bitcoins for local fiat currencies by sending the assets to a user’s cellphone account.
In Nigeria, the Central Bank has prohibited the Nigerian citizens to use credit cards for international operations back in 2016 due to violent devaluation of the country’s national currency of Naira. Lots of local and international startups entered the market to offer remittance services that could bypass the regulator’s prohibition.
Developing economies are generally considered the best battlefield for cryptocurrency-based services. For instance, in Venezuela, which is heavily struck with a Leviathan of a financial crisis, locals tend to prefer cryptocurrencies over fiat to send money abroad and keep their own savings. Several exchange services like SurBitcoin, Tigo or Cryptobuyer are experiencing a popularity boom.
One of the most extreme examples of the need to make cryptocurrencies accessible to those who have no idea of them is Russia and Ukraine. Following several years of ongoing hostilities, the countries have virtually disrupted all payments channels that could enable locals to transact money to each other. With the need to do so still prevailing, cryptocurrency startups are looking for a new approach that could remedy the situation.
A good example here is SibCoin, a cryptocurrency that promotes itself as a “project that makes cryptocurrencies closer to people”. Its method is quite different from that employed by BitPesa.
Say, if someone in country A wishes to send money to someone else in country B, they have to buy the desired amount of SibCoins, which effectively ends the hard part of the whole business. All the sender has to do then is specify the recipient’s phone number and come up with a password which is then sent to the receiving party via any preferable method of instant messaging. The recipient receives a text notification containing a link to the project’s website where they should enter the password and select the desired method of receiving the money (cash or credit card). Remarkably, the recipient gets the amount in their local currency, which relieves them from the need to undergo a prolonged process of converting a cryptocurrency into fiat.
This method, however, is only being under development, and, once deployed, would require that lots of third-party exchange services come on board, otherwise the entire project would never work.
Startups aren’t the only ones who seek to ride the tide of blockchain technologies. One of the world’s biggest payments systems Visa has struck several deals with technological companies to develop a blockchain solution for money transfers. In 2016, it has partnered with BTL Group to implement blockchain technology in interbank remittances, while Visa Europe and bitcoin startup SatoshiPay have already developed a joint cryptocurrency project for micropayments for internet-connected devices.
This further highlights the fact that the problem goes way beyond the issue of cryptocurrency acceptance. The impending urgency of a method that could enable inexpensive and fast transfers of money to any part of the world causes both small fish and blue whales of finance to seek solutions. Most of them, however, have something to do with cryptocurrencies as they offer the speed and low prices that traditional methods can not.
Widespread acceptance of cryptocurrencies is either a chimerical ideal, or a matter for a distant future. The most likely way that the industry is going to take is combining the advantages of the old and the new, and the examples considered herein might be predecessors of the killer app that will finally revolutionize the international finance.
The solution itself, however, is yet to be found.