As the world economy continues to change, it also rapidly accepts transformative consumer technologies. This affects how we think about cross-border payments and remittances. For decades, the best options for sending money across borders have solely been on traditional methods such as banks and money transfer services like Western Union.
These methods are not only time-consuming but can be very expensive and not easily accessible to every person. However, the advent of cryptocurrency provides a new and innovative solution to these challenges. Read on to find out how cryptocurrency has changed cross-border payments and remittances, its benefits, and the challenges with its use.
Usage of Cryptocurrency for Cross-Border Payments and Remittance
A major application of cryptocurrency lies in remittances. Traditional remittance services are not only slow but expensive with lengthy processing times, and high transaction fees. Also, they can be sometimes inaccessible to low-income and rural areas. Apart from remittances, cryptocurrency can be used for cross-border payments.
Like the above, traditional cross-border payments are also expensive and slow, while cryptocurrency offers a cheaper, more efficient, and faster alternative. For instance, a look at Litecoin price and usability shows that it is highly liquid making it easier for trades. Businesses engaging in cross-border trade can use cryptocurrency to reduce transaction costs and bypass intermediaries. This helps facilitate international trade and increase profit margins.
Benefits of Cryptocurrency-Based Remittance
- Reduced costs: payments and remittances made with cryptocurrency are quite less expensive than those made with traditional means.
- Faster transactions: Cross-border transactions done with cryptocurrencies like Bitcoin are nearly immediate in their speed. This allows the removal of protracted wait times involved with traditional remittance systems. This speed can be advantageous during time-sensitive or critical circumstances.
- Financial inclusivity: With cryptocurrency, underbanked and unbanked individuals can access financial services. All that is needed includes a digital wallet and an internet connection.
- Transparency and security: Blockchain technology offers secure and safe transactions. It also provides a defense against manipulation, unauthorized access, and fraud with its decentralized nature. Since the transaction history is unchangeable and auditable, it increases trust and accountability.
- Exchange rate stability: stablecoins anchored to fiat currencies have successfully tackled the problem of exchange rate volatility through the reduction of effects on the value of the transferred payment. Cryptocurrency’s steadiness provides dependability and assurance for both recipients and senders.
However, despite the above benefits, it would be best to consider the following things:
- Stablecoins usually reduce the issue of price volatility, but other cryptocurrencies are usually subject to intense price variations. This volatility might affect the value of transferred funds, so you must carefully choose the cryptocurrency to use.
- Every jurisdiction has its regulatory environment for cryptocurrency. For compliance, you must know the regulatory and legal frameworks applying to cryptocurrencies both in receiving and sending nations.
- In terms of adoption, cryptocurrency is still a relatively new concept for many individuals. So, for there to be widespread adoption and successful implementation in cross-border payments and remittances, individuals must know the right use, advantages, and hazards of cryptocurrencies.
Endnote
The advent of cryptocurrency provided a cost-effective and efficient option for businesses as regards remittance and cross-border payments. With its several advantages as mentioned above, more companies and individuals are beginning to integrate cryptocurrencies and blockchain technology for international settlements and payments. However, individuals and businesses must carefully understand its advantages and drawbacks as new developments keep coming up in cryptocurrency payments and remittances.
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- Source: https://www.fintechnews.org/cross-border-payments-and-remittances-using-cryptocurrencies/
