Source: Cointelegraph Original: "{title}"
Key Points
Cryptocurrencies significantly reduce the high fees and lengthy processing times associated with traditional remittance methods, providing near-instant transfers at minimal cost.
Cryptocurrencies enable seamless international remittances, particularly effective in regions with limited banking infrastructure or during crises such as conflict and economic instability.
By utilizing blockchain technology, cryptocurrencies eliminate intermediaries, ensuring faster and more secure transfers, avoiding delays caused by banks or holidays.
To ensure smooth transactions, carefully check wallet addresses, use secure platforms, understand blockchain fees, and comply with local regulations to avoid complications.
On May 22, 2010, Laszlo Hanyecz made history: he purchased two Papa John's pizzas with Bitcoin (BTC), exchanging 10,000 Bitcoins worth only $25 at the time for a meal. At that time, very few people knew that cryptocurrencies would become a viable solution for international remittances.
But why consider using cryptocurrencies for cross-border transactions?
Traditional remittance methods are costly and time-consuming. For example, if you send £1,000 from the UK to Los Angeles via a bank, you might incur fees of £10 to £15 (depending on the bank chosen), and the processing time can be a real hassle—often taking multiple business days.
While fintech solutions like Wise and Revolut have reduced transaction costs (between £1.50 and £4.66) and processing times (usually instant), many still face challenges in accessing these services.
This article explores using cryptocurrencies to remit money to family and friends abroad, highlighting the advantages of using cryptocurrencies for cross-border payments.
Why are international remittances expensive?
Remitting money globally in fiat currency is expensive due to multiple layers of fees, including transfer fees, intermediary bank fees, receiving bank fees, and exchange rate spreads. On average, transfer fees alone account for 2%-4% of the total remittance amount.
Additionally, international bank transfers typically occur through networks like the Society for Worldwide Interbank Financial Telecommunication (SWIFT), which connects banks worldwide for communication and transactions. When funds circulate through multiple banks—often for currency exchange or to simplify transfers—intermediary banks charge additional fees to process these transactions.
Prerequisites for Sending Cryptocurrency
To make cryptocurrency payments, here are the prerequisites you need to understand:
Understand the basics of cryptocurrency: Before remitting, familiarize yourself with basic cryptocurrency terminology and processes, such as major cryptocurrencies like Bitcoin and Ethereum, stablecoins like Tether (USDT), wallets, cryptocurrency exchanges, transaction fees, blockchain confirmations, etc. Understand the volatility of cryptocurrencies and the associated risks.
Set up a secure cryptocurrency wallet: When choosing a cryptocurrency wallet, consider your needs and select either a custodial or non-custodial wallet. Custodial wallets are managed by third parties who handle your private keys, simplifying use but sacrificing control. Non-custodial wallets, such as hardware or software wallets, provide full control over your private keys, prioritizing security but requiring responsible key management.
Choose the right fiat-cryptocurrency conversion platform: Look for a reputable platform with low fees and strong security measures. Verify that it supports your local fiat currency. Complete any necessary procedures to fulfill Know Your Customer (KYC) requirements and finish the registration process.
Did you know? Fiat-backed stablecoins reached a market cap of $20.97 billion on March 17, 2025, and continue to grow.
How to Use Cryptocurrency to Remit Money Abroad?
To use cryptocurrency for global remittances, follow these steps. This example uses the Binance app for illustration.
Step 1: Set Up a Cryptocurrency Wallet
Choose an exchange or wallet compatible with the cryptocurrency you intend to send. Protect your wallet by setting up a recovery phrase and enabling two-factor authentication (2FA) and other security features.
Step 2: Purchase Cryptocurrency
Transfer the desired amount of fiat currency to the platform to buy the cryptocurrency you plan to send. Some wallets allow you to purchase cryptocurrency directly through a linked fiat currency account. You will need to pay exchange fees to the exchange, so ensure the cryptocurrency you purchase includes this fee.
Step 3: Obtain the Recipient's Wallet Address
Confirm the recipient's wallet address. This is crucial for transaction accuracy, as transactions are irreversible.
Step 4: Initiate and Complete the Transaction
Click the "Withdraw" button.
Copy the recipient's wallet address, paste it into the address field, and enter the amount you wish to transfer. Check all transaction details, including network fees. If you need a faster transaction, you can opt for a higher fee.
Click "Send." The platform will ask for confirmation before sending the amount to the recipient's address. The funds should arrive within minutes.
Step 5: Notify the Recipient
Inform the recipient that the transaction is complete and share the transaction ID for tracking if necessary.
Cryptocurrency Transfer Platforms
There are various ways or platforms to transfer cryptocurrency, including:
Cryptocurrency Exchanges: Allow users to buy, sell, and trade cryptocurrencies. They act as intermediaries, providing a secure environment for these transactions. Binance and Coinbase are examples of cryptocurrency exchanges.
Peer-to-Peer (P2P) Platforms: Facilitate direct cryptocurrency transactions between individuals. This decentralized approach eliminates the need for intermediaries, providing more control and potential cost savings. Binance P2P is an example of a P2P cryptocurrency exchange.
Mobile Apps: Mobile applications for cryptocurrency remittances leverage blockchain technology for fast and affordable international remittances. These apps simplify the process, allowing users to conveniently send and receive funds across borders. Strike and Cash App are examples of mobile apps you can use to remit cryptocurrency.
Did you know? Satoshi Nakamoto sent the first Bitcoin transaction to Hal Finney on January 12, 2009. This groundbreaking transaction contained 10 BTC, worth over $500,000 fifteen years later.
Are Cryptocurrency Cross-Border Payments Really More Efficient Than Traditional Transfer Methods?
The best way to understand whether cryptocurrency cross-border payments are more efficient than traditional methods is to look at it from the user's perspective, as they are the end consumers of both services.
So, let's evaluate the advantages of using cryptocurrency compared to traditional payment methods through some examples.
Example 1: How Cryptocurrency Payments Outperform Western Union and Traditional Transfer Methods
A Reddit post highlights that cryptocurrency cross-border payments are often underestimated. One user shared their experience providing feedback to an overseas platform, where they used an ETH address to both verify their identity and receive USDC payments.
The transaction fee was only $0.008869, and the settlement time was just 2 seconds. This stands in stark contrast to traditional services like Western Union or wire transfers, which involve complex processes, multinational banks, payment networks, and a lot of paperwork, making cryptocurrency payments a more efficient alternative.
Example 2: Stellar (XLM) Becomes a Cost-Effective Remittance Choice
Another remittance example on Reddit involved a user needing to send money home for renovations. They were frustrated that almost every option using fiat payment networks consumed a significant amount of funds before reaching the recipient. For instance, Western Union charges users $10-12 for every $200 remitted. This Reddit user also found that platforms charged an additional 1%-2% fee based on exchange rate fluctuations during the remittance.
Using Money Transfer Operators (MTOs) and online banking, transactions were expected to take two to three days, with fees of 3%-5%. On PayPal, the fee was about 10%.
In this case, the user found cryptocurrency to be the best option. By using cryptocurrencies like Stellar (XLM) for transactions, they only paid negligible fees and were faster than any of the aforementioned methods. Even considering on- and off-ramp fees, the total cost was still lower than other options.
Benefits of Using Cryptocurrency for Remittances
As shown above, using cryptocurrency for remittances offers many advantages:
Lower fees and faster transfers: Unlike traditional banking systems that may charge high fees and require days for processing, cryptocurrency transactions are completed within minutes at a fraction of the cost of traditional methods.
Avoid currency exchange hassles: Using cryptocurrency allows you to avoid issues related to currency exchange. Sending funds in cryptocurrency eliminates the need to convert between fiat currencies, saving time and avoiding losses due to unfavorable exchange rates.
No intermediary or bank delays: Transactions are executed directly between the sender and receiver via blockchain technology, with no role for banks. This helps you avoid delays caused by bank holidays or system outages.
How Can Recipients Cash Out Cryptocurrency?
Cryptocurrency users can cash out using cryptocurrency exchanges or cryptocurrency ATMs, or they can spend the funds directly if merchants accept cryptocurrency.
If you receive cryptocurrency at an exchange, you can sell it on the same platform for fiat currency. However, be prepared to incur fees from the cryptocurrency exchange. You also need to consider the spread, which is the difference between the buy price (ask price) and the sell price (bid price) of the cryptocurrency.
This spread is dynamic and influenced by various factors, including the specific cryptocurrency, the trading platform used, trading agreements between brokers, market volatility, liquidity levels, transaction fees, and trading volume.
In contrast, if you receive cryptocurrency through an exchange, you can easily sell it on the same platform for fiat currency.
Cryptocurrency ATMs can be quite convenient for cashing out your cryptocurrency. If there is a cryptocurrency ATM in your area that supports the cryptocurrency you received, you can cash out there.
However, if you are fortunate enough to find a merchant that accepts cryptocurrency payments, you can spend your cryptocurrency directly there without conversion.
How Does Cryptocurrency Address Key Challenges in International Remittances?
Cryptocurrencies provide powerful solutions to the challenges of traditional international remittances:
Overcoming Financial Exclusion
Using cryptocurrency also allows you to send payments to family and friends living in areas with limited banking infrastructure, overcoming barriers to financial inclusion. Many regions, especially in Africa and South America, face limited or restricted banking infrastructure due to sanctions or economic instability.
In Venezuela, people bypass hyperinflation and sanctions by receiving BTC or USDT remittances, ensuring value preservation and quick access to funds. In September 2021, El Salvador officially adopted Bitcoin as legal tender to improve access to financial services for its population.
Eliminating Barriers for the Unbanked
Lack of documentation is a primary reason many people are unbanked. Without identity and address verification documents, they cannot access fiat currency platforms like Wise or Revolut, which must comply with strict regulatory requirements.
Nevertheless, they can use cryptocurrency platforms, especially decentralized exchanges (DEXs), to send and receive funds.
Reducing Delays and Costs
Immigrant workers in countries like the UAE or Singapore regularly remit money to their families in countries such as India, the Philippines, or Nigeria. Sending through traditional channels results in delayed transfers (2-5 business days) and transaction fees of up to 10%.
On the other hand, the average transaction cost on the Solana blockchain is about $0.00025, with a transaction confirmation time of approximately 5 seconds.
Sending Emergency Funds to Conflict Areas
In conflict situations like those in Ukraine or Afghanistan, banking systems often shut down, or international remittance services cease operations. Refugees and families use cryptocurrencies to receive emergency funds immediately when local banking systems collapse.
Providing Rapid Relief During Disasters
Vitalik Buterin, co-founder of Ethereum (ETH), made significant contributions to the COVID-19 relief fund in India initiated by Polygon founder Sandeep Nailwal.
In May 2021, he donated 50 trillion Shiba Inu (SHIB) tokens, valued at $1.2 billion at the time. Previously, Buterin donated approximately $600,000 worth of ETH and Maker (MKR) tokens in April 2021.
Breaking Free from Strict Capital Controls
Countries often impose strict capital controls or freeze accounts during financial instability. For example, after the economic crises in Greece and Lebanon in 2009 and 2019, governments implemented stringent financial measures. In such cases, receiving and sending funds using fiat currency often becomes cumbersome, but cryptocurrencies provide a solution.
Did you know? As of November 2024, Bitcoin's market cap has reached nearly $2 trillion, surpassing silver's market cap of $1.7 trillion, establishing itself as a major global asset.
Comparison of Cross-Border Payment Systems: Traditional Banks vs. Fintech Platforms vs. Blockchain Networks
Traditional banks, fintech platforms like PayPal, and blockchain networks like Ethereum and Tron each offer unique features and limitations.
Banks provide a regulated medium but are costly and slow, while PayPal is faster but charges significant fees. On the other hand, blockchain networks offer a borderless, cost-effective alternative with varying transaction speeds and scalability.
Here is a comparison table of cross-border payment systems:
Tips for Secure and Efficient Cryptocurrency Transfers
Ensuring the security of cryptocurrency transfers is crucial. Here are some tips to keep your cryptocurrency transfers safe and efficient:
Double-check wallet addresses: Before sending funds, ensure the recipient's address is correct. Transactions are irreversible, so a mistake could lead to loss of funds.
Use reputable platforms: For transferring cryptocurrencies, use established platforms like Binance or Coinbase. These platforms provide secure infrastructure while reducing the risk of fraud or technical issues.
Enable 2FA: Enable two-factor authentication (2FA) on your wallet and exchange to add an extra layer of security and reduce the likelihood of unauthorized access to your account.
Consider network fees and speed: Understand the costs and transfer speeds of various blockchains. For example, Bitcoin transactions take longer and incur higher fees, while newer blockchains like Solana or Polygon do not.
Protect your wallet: Whether you use a hot wallet or a cold wallet, ensure you regularly update your wallet software to avoid vulnerabilities.
Common Issues in Cryptocurrency Transfers and How to Overcome Them
If you are new to cryptocurrency payments, you may encounter the following issues:
Network congestion and delays: During peak transaction demand, issues like network congestion and delays can occur, leading to extended processing times. To mitigate this, you can prioritize transactions with higher gas fees to obtain faster confirmations during peak times.
Volatility: The volatility of cryptocurrencies reduces the payment value in transfers. To avoid volatility and ensure value consistency, you can use stablecoins like USDT or USDC.
Incorrect wallet address: If you enter the address incorrectly, it may result in permanent loss. Always double-check the recipient's address or use a QR code to ensure accuracy.
Regulatory hurdles: If you are unaware of the regulatory environment in your jurisdiction, you may face unexpected obstacles when sending. To avoid issues, familiarize yourself with local regulations and comply with them.
Taking proactive measures when remitting cryptocurrency to family and friends helps make transactions smoother, safer, and more reliable. Adjusting gas fees, using stablecoins, and double-checking details can prevent hassles and ensure funds reach the recipient.
Are There Tax Implications for Sending Cryptocurrency Abroad?
Sending cryptocurrency abroad will have tax consequences depending on the country. In the United States, the IRS treats cryptocurrency as property; therefore, if its value has increased since acquisition, transferring funds may result in capital gains tax.
In the UK, HMRC considers such transactions taxable if the gains exceed the annual exemption limit.
Japan taxes cryptocurrency gains at progressive rates, classifying them as miscellaneous income. In contrast, Singapore does not impose capital gains tax but may tax businesses interacting with cryptocurrencies, while the UAE has no personal income tax, making it a crypto-friendly country.
Wherever you are, maintaining detailed transaction records is crucial for compliance. Consult local tax standards or experts to ensure accurate reporting and avoid penalties.
Related: How to Buy USDC on Base: A Step-by-Step Guide
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