Currently dominated by countries like Mexico, China and India, the remittance market — workers sending money back home — is worth over $500 billion a year, and today, crypto transfers constitute around 15% of all transactions.
Venezuel, which has shot its economy in the foot, has just announced a welcome news — its very own crypto remittance platform — Patria Remesa — is now live. This will allow Venezuelans to transact with Bitcoin and Litecoin, with a few terms and conditions. They must exchange crypto with Bolivars or Petros. The digital Patria Teresa will have a regulator, and there will be KYC and AML conducted. Fxstreet.com notes that this will be a centralized network.
The stats on the remittance market are available from World Bank. The year 2017 saw transfers from the US of around $148 billion, part of the overall $689 billion remittance market. The top most countries here Mexico, China, India, the Philippines and Vietnam. There are 244 million migrants who live and work in other countries and rely on money transfer services.
For blockchain and crypto, remittance is indeed a very genuine application deriving from the very nature of cryptocurrencies.
There are hardly any transfer charges going beyond a few cents, even while transferring millions of dollars. Like Ripple (XRP) recently transferred $50 million in 3 seconds with just a few cents. XRP is supposed to be popular for money transfers like these, and has recently joined hands with Moneygram.
Money transfer services like Paypal, Moneygram, or Western Union, and bank wires and postal transfers constitute the bulk of transactions. Also available are online checks and the good, old letter envelope. Money transfer agents however are known to charge hefty fees, anywhere between 10–20%, usually in the upper bracket. This is a substantial fee to pay for low income workers and expats.
Eliminating the middleman is the golden promise of cryptocurrencies like Bitcoin. And the remittance market is the best illustration of what can be done. But the current adoption rate, as per a survey by Clover, shows only about 15% use crypto. Some of the major hurdles are technicalities and the feat that the recipient wouldn’t understand crypto management.
The crypto remittance services are in operation, like centbee in South Africa, or the Noah Coin in the Philippines. The latter’s site tells us their vision: “For millions of migrants the blockchain opens new opportunities to deliver financial support to their families.” And their plans: “The Noah Project plans to use cryptocurrency to help citizens of developing nations working abroad finance infrastructure and economic growth back home.”
For India, among the top countries in the remittance market, the impending ban on cryptocurrencies will also mean a direct impact on those who wish to utilize crypto to cut down on fees and commissions when sending remittances back home.
Interestingly, there is a cryptocurrency called Rupee (RUP)! It was floated in 2017 for catering to this market apart from other uses. The fate of RUP, and whether it is genuine or just a shady project, is unclear.
The big players however are certainly eyeing the global payment and money transfer market. Facebook and Whatsapp have above 1 billion customers, around 20% of the world’s population. Samsung too has a good user base for its crypto wallets, which are now part of some of its models.
As per Marketwatch, the crypto / digital remittance market could reach above $8 billion by 2025, a rather small portion of the overall size. If regulations turn favorable, this projection could be exceeded by several times.
Photo by Christine Roy on Unsplash