Originally published on October 1, 2020 and updated on September 25, 2024
Sending money overseas through conventional means can be both expensive and time-consuming. According to data from the World Bank, the cost of sending $200 in 2023 in the last quarter was an average of 6.4% of the entire amount- that’s a chunk of change!
For people who frequently send money to their families, these fees can quickly add up, significantly reducing the amount their loved ones receive and causing financial strain.
This is where Bitcoin remittance becomes a game changer. Unlike traditional remittance services, Bitcoin allows users to send money across borders instantly and with minimal fees.
You might be asking, ‘Is it safe to use Bitcoin for sending money?’ The short answer is absolutely! It’s one of the more secure options.
Read along to learn more about using Bitcoin money transfers and why you should consider them.
Key takeaways:
- Bitcoin remittances significantly reduce costs and transaction times compared to traditional methods. Users can send money internationally with minimal fees and receive funds almost instantly,
- Bitcoin is decentralized, allowing users to send money anytime, anywhere. This decentralization is particularly beneficial for individuals in regions with limited access to traditional banking services.
- While Bitcoin remittances hold promise, especially in developing economies, challenges such as price volatility and regulatory issues remain. Integrating stablecoins could address volatility concerns, making Bitcoin a more stable option for remittances.
What is Bitcoin remittance?
Bitcoin remittance is a way to send money overseas using Bitcoin. Unlike traditional fiat remittances involving banks and intermediaries, Bitcoin transactions are peer-to-peer, meaning funds are transferred directly between individuals without needing a third party.
So, how does this all work? Let’s break it down:
- The sender buys Bitcoin from a cryptocurrency exchange or a P2P marketplace like Paxful using their local currency.
- The sender transfers Bitcoin to the recipient’s wallet address. This process is fast, and fees are usually lower than traditional remittance services.
- The recipient receives the Bitcoin in their wallet and can convert it to their local currency by selling it on a P2P platform or another exchange. The funds can then be withdrawn to a bank account, mobile wallet, or other local financial service.
How does traditional remittance work?
Traditional remittance refers to sending money from one country to another. It typically involves an immigrant sending funds back to family members in their home country. The most common methods include wire transfers, electronic payment systems, mail, drafts, or checks.
Let’s break it down with an example: You want to send money from the United States to Argentina. The first step is to visit a Money Transfer Operator (MTO), such as Western Union or MoneyGram. You’ll need to provide the recipient’s details, including their name, location, and the amount of money you’re sending. Once the MTO has this information, they handle the transfer, converting your money to the recipient’s local currency at the current exchange rate.
Although MTOs are the face of the transaction, they rely on larger Remittance Service Providers (RSPs) to complete the process. These RSPs provide the software and infrastructure that allow MTOs to send money internationally. The MTO and RSP charge fees for their services, making remittance costly, especially for frequent transactions.
What are some of the challenges with the current remittance model?
The current remittance model faces two significant challenges: high costs and slow transaction speeds. Fees can quickly accumulate, and the money can take a couple of days up to a week to reach its intended destination.
Traditional money transfer services impose additional withdrawals, deposits, and transfer charges. They also generate profit by converting funds at their exchange rates, which often do not favor the sender.
Bank transfers can be even more cumbersome, necessitating detailed information such as account numbers and SWIFT codes and often imposing higher fees. Furthermore, banks frequently limit the amount of money that can be sent or received, adding another layer of inconvenience.
How to send money internationally with Paxful
If you are looking for options for sending money overseas, Paxful is a wonderful option. Here is how to go about it:
First, you and your recipient should create and verify your Paxful account.
Next, you must Buy Bitcoin using any 300+ payment options available on Paxful.
Ask your recipient to send their Paxful account address or QR code to you.
Once you have the recipient’s Bitcoin address, head to your Paxful account and send Bitcoin by copying your recipient’s account address or scanning their QR code. Note that Bitcoin transactions are irreversible, so ensure the address is correct.
Simple, right? The best part is that cashing out is just as easy; all you need to do is reverse the process:
The moment Bitcoin is transferred to your recipient’s account, tell them to cash out by selling Bitcoin on Paxful or checking existing offers on the Sell Bitcoin page. They can also create a new offer and cash out using 350+ payment methods.
The beauty of Bitcoin is its digital, decentralized nature—it’s perfect for folks who might not have easy access to traditional banking. Those people can instantly send money online but only require a smartphone and a stable Internet connection.
If you want to see the value of your local currency in BTC, you can check out our Bitcoin converter page.
Benefits of using Bitcoin for remittances
- Lower transaction costs: Bitcoin remittances solve two major issues traditional remittances face: price and speed. With Bitcoin, you can send money much faster and at a fraction of the cost. There are fewer intermediaries and fees, which means more of your hard-earned money stays in your pocket. Bitcoin’s lower fees can even create profit opportunities.
- Faster transaction speed: Traditional money transfers can take processing days, whereas Bitcoin transactions settle in minutes. This rapid transaction speed is beneficial when families need money urgently, allowing quick access to funds without the long waiting times associated with conventional methods.
- Decentralization and flexibility: Unlike traditional money transfers, Bitcoin isn’t tied to any government or institution, meaning you can send as much as you want, wherever you want, at any time. Banks are often closed on holidays, weekends, and non-business hours, limiting your ability to make urgent transactions.
- Versatile payment options: Bitcoin offers incredible flexibility in terms of payment options and transaction amounts. On platforms like Paxful, you can choose from hundreds of payment methods, many of which are tailored to specific countries. You can even buy Bitcoin in smaller amounts, starting as low as $10, making it accessible to more people.
Challenges of Bitcoin remittance
Bitcoin remittance has made sending money across borders faster and cheaper, but it also comes with several challenges that users should be aware of. Let’s dive into these potential hurdles and how to manage them.
- Volatility of Bitcoin: Bitcoin’s price is notoriously volatile. Imagine sending $500 worth of Bitcoin to a family member, but by the time it reaches them, the value has dropped to $450 due to a sudden price swing. This unpredictability makes Bitcoin risky for remittance.
- Regulatory issues: Not every country is Bitcoin-friendly. Some governments have strict regulations, and Bitcoin remittances might be scrutinized under Anti-Money Laundering (AML) and Know-Your-Customer (KYC) laws.
- Accessibility and usability: Buying, storing, and transferring Bitcoin can seem daunting for people unfamiliar with Bitcoin or cryptocurrencies. The technical knowledge required can be a significant barrier to entry, particularly in regions with limited access to digital education.
- Tax Implications: In some countries, sending and receiving Bitcoin is subject to taxes. If you’re unaware of the tax implications of your transactions, you could face penalties or fines.
Safety and fraud prevention: Bitcoin remittance services can be a target for scammers and hackers. Losing private keys or falling victim to phishing attacks can result in lost funds that cannot be recovered.
This might interest you: Paxful’s Safety Guide for Traders.
What’s the future of Bitcoin remittance?
Looking ahead, Bitcoin remittance seems bright—especially in developing countries where every dollar counts. Traditional remittance methods are often expensive, slow, and hard to access in rural areas. Bitcoin, however, is emerging as a game-changer by addressing these issues.
Growth in developing economies
Bitcoin’s potential to revolutionize remittances is especially critical in developing economies. Countries across Africa, Southeast Asia, and Latin America receive billions in remittances each year, with fees sometimes reaching 7-10% of the amount sent. Using Bitcoin can reduce these fees to a fraction, allowing recipients to retain more of the money they need. Additionally, you can send Bitcoin anytime, even on weekends. This is a considerable advantage in countries with limited banking infrastructure.
Integration with stablecoins and other cryptocurrencies
One of the main concerns with using Bitcoin for remittances is its volatility. Bitcoin’s value can fluctuate dramatically quickly, making it difficult for users to predict the exact value of their transfers. Stablecoins and other cryptocurrencies are being integrated into remittance systems to address this. Stablecoins, like USDC or USDT, are pegged to fiat currencies, which minimizes price fluctuations and makes them more suitable for everyday transactions.
Challenges to overcome
Despite the promise of Bitcoin remittances, several challenges must be addressed for wider adoption.
- Volatility: Although stablecoins help mitigate Bitcoin’s price swings, many users still view Bitcoin’s inherent volatility as a barrier to widespread use. Until Bitcoin becomes more stable or better mechanisms are in place for instant conversions, its volatility will remain challenging.
- Accessibility: While smartphones have made Bitcoin more accessible, internet and smartphone penetration remain limited in some developing regions. Expanding Bitcoin adoption will require efforts to bridge the digital divide and provide the unbanked with better internet access and financial education.
Regulatory hurdles: Governments in many developing regions have not fully embraced cryptocurrencies. Some are skeptical, while others are actively creating regulatory barriers.
