It’s cheaper and faster … and it can also help control money laundering.
It’s very exciting how cryptocurrencies could transform cross-border payments as we know them – through wire transfers, where workers overseas send money to their loved ones home. much cheaper.
Currently, the World Bank estimates that transfers through fiat channels result in average rates of 6.75%. For someone with a limited income, this can be a significant part of your income. While this is less than the 9.67% calculated in 2009, there is still a long way to go. In the early 2010s, the G8 and G20 set a goal of reducing remittance costs to 5%, and the United Nations Sustainable Development Goals also set a target of 3% by 2030.
Cryptocurrencies could help achieve these goals much faster. According to Deloitte, blockchain can reduce transaction costs by 40% to 80%. But the benefits don’t end there. Currently, it can take three to five business days for funds to clear over old cable networks – not ideal for someone in dire need of money. However, on certain blockchain networks, payments can be confirmed in seconds.
The benefits don’t end there. As Deloitte points out, blockchain transactions can be an excellent source of data – which means metadata can be carried from one end to the other. All of this can help curb money laundering and the financing of terrorism, two areas that affect regulators. Many cryptocurrency platforms have introduced KYC (Know Your Customer) protocols to verify users as well.
A key advantage that cryptocurrencies can offer is opening up access to financial services for non-banks. Research shows that 80% of consumers in sub-Saharan Africa fall into this category and worldwide. A total of 1.7 billion people worldwide do not have a bank account. There can be a variety of reasons for this. Financial institutions may not operate in your geographic area, these services may be too expensive, or consumers may feel suspicious.