Cryptocurrencies have been a major disruptor to financial institutions and trading in recent years. Now they’re transforming the way we send money overseas as well.
Understanding how cryptocurrency works
It’s a question most of us have asked: how can I send cash abroad without being hit by exorbitant fees?
Cryptocurrencies are digital assets that can be exchanged for goods and services instead of using a traditional flat currency like the US dollar or the European euro. They’re decentralised, which means they’re not backed by a central authority like a bank or a government. There’s no middleman between you and the person you’re paying, so you have full control over your cryptocurrency wallet.
Transferring money internationally using Bitcoin
When it comes to transferring money internationally, Bitcoin and other cryptos offer some of the cheapest ways to send cross-border funds. This is because cryptocurrency transfers are decentralised, which means you don’t have to pay the slew of fees charged by middlemen for a traditional wire transfer.
Aside from the cost-saving aspect, there are several reasons why cryptos are an attractive option for international money transfers:
- Speed: Unlike banks, cryptocurrency services generally operate 24/7. In many cases, transactions happen instantly.
- Freedom: Because cryptos aren’t tied to banks or government institutions, you can send as much money as you want, whenever you want.
- Flexibility: There are hundreds of ways to transfer cryptocurrencies with different payment options and platforms suited to different destination countries.
- Transparency: With a traditional international bank transfer, you hand your money to a third party and hope it gets where it needs to go. With a crypto transfer, you can see exactly where your funds are at all times.
Traditional versus cryptocurrency money transfers
To send money abroad the traditional way, you need to go through a Money Transfer Operator (MTO) like Western Union or arrange a direct transfer from your checking account.
Both banks and MTOs usually charge a fee for international money transfers. They also make a profit on the exchange rate they use when converting one currency to another.
When sending money from the host country to the recipient, the sender can face a transaction fee, a loss of value due to the exchange rate, and a fee relative to the speed of the transfer - taking anywhere from under an hour to more than six days.
The majority of people remitting payments to their countries of origin are likely fulfilling families or individuals in developing countries who are considered to be underbanked. What’s more, remittance payments function as an alternative financial solution for, often, the poorest segments of society.
With international cryptocurrency transfers, you can send Bitcoins or other digital currencies directly to a recipient’s wallet via a peer-to-peer cryptocurrency exchange. Once it reaches their wallet, the recipient can hold the cryptocurrency or cash it out.
Are cryptocurrency money transfers free?
In short, it depends. Some exchanges and platforms will allow you to send cryptocurrency from your wallet to another person’s wallet for free. Others charge a minimal fee.
In most cases though, using cryptocurrency is one of the cheapest ways to send money abroad because you don’t have to pay the fees and foreign exchange rates associated with MTOs and banks.
How to send money from blockchain to a bank account
To transfer cryptocurrency to a bank account, you’ll need to convert your virtual currency to fiat currency via the exchange platform you’re using. From there, you can cash out the funds to a bank account.
Alternatively, there are a few other ways to ‘cash out’ cryptocurrency:
Spend it directly: A growing number of companies are accepting cryptocurrencies such as Bitcoin as payment. This means you can shop online and pay directly using your crypto wallet.
Use a crypto ATM: In major cities in the United States and other countries, you can buy Bitcoin and other cryptos at physical ATMs. Some of these ATMs will also allow you to convert crypto and withdraw cash in the local currency.
Sending money abroad with Kinesis
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