In recent years, cryptocurrencies have become a major disruptor to financial institutions and how investors are trading their assets. 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?
Before we look at how to use cryptocurrencies for international money transfers, it’s worth understanding the fundamentals of cryptocurrencies.
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 British Pound. They are decentralised, which means they’re not governed or overseen by a central authority like a bank or a government. This means there’s no middleman between you and the person you’re paying, so you have full control over the assets in your cryptocurrency wallet.
Bitcoin is the most widely known cryptocurrency, but there are over 12,000 cryptocurrencies around today, with this figure growing steadily as the industry gains popularity. Other notable assets in the crypto space include Ethereum, Ripple and Cardano, all of which can also be sent to others around the world at low costs.
Cryptocurrencies are powered by a blockchain, which is a decentralised shared ledger that records all transactions using a distributed peer-to-peer network of nodes. Transactions on a blockchain are immutable, irreversible and can be viewed by anyone with an internet connection.
This means that all digital assets are traceable, as there’s an owner ascribed to every coin. This makes it virtually impossible to ‘cheat the system’, and it’s why cryptocurrency trading can exist without oversight by banks or other authorities.
Transferring money internationally using Bitcoin
When it comes to transferring money internationally, Bitcoin and other cryptocurrencies such as Ethereum, Cardano and Ripple offer some of the cheapest ways to send assets cross-border. Choosing the right cryptocurrency is important as you need to take into account transaction fees, wallet compatibility and the time to send.
Most major software wallets including Metamask and TrustWallet can both send and receive these assets. Wallets on exchanges such as the Kinesis exchange can also be used to send and receive assets such as Ethereum and Ripple.
Another option is a hardware wallet, which is an encrypted physical device that secures your assets offline. These provide greater security over software wallets and enable you to send and receive assets in the same way you would using other wallets.
To get started, you can either use an exchange wallet on Kinesis or another exchange or use a software wallet to send your first transfer.
Traditional versus cryptocurrency money transfers
To send money abroad the traditional way, you’ll 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.
Not surprisingly, this approach is expensive. In Q3 2022, the global average cost to send money overseas was 6.30%. That’s more than $12 in transfer fees for a payment of just $200!
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 helping 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 Bitcoin or other digital currencies directly to a recipient’s wallet via a peer-to-peer cryptocurrency exchange or using their wallet. Once it reaches their wallet, the recipient can hold the cryptocurrency or cash it out to local currencies using an exchange.
Cryptocurrencies have become an attractive option for international money transfers for a number of reasons, including
- Speed: Unlike banks, cryptocurrency services generally operate 24/7, and in many cases, transactions happen instantly.
- Freedom: Because cryptocurrencies 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 crypto transfer, you can see exactly where your funds are at all times using the blockchain.
Is using cryptocurrency to send money abroad risky?
Caution and due diligence should be taken before sending any amount using cryptocurrencies. It’s worth noting that whilst blockchains give you a certain level of anonymity, blockchain transactions are traceable and recorded – which effectively leaves a trail of your transfers to and from a wallet address. This is unlike cash, which is effectively anonymous and untraceable when using paper fiat currencies.
The second is removing your assets from an exchange or a wallet. To exchange cryptocurrencies for local currencies and remove them from an exchange or wallet to a card or bank account can be tricky if local banks flag the activity as suspicious.
Before sending or receiving cryptocurrency, check the on and off-ramp procedures to ensure you can deposit and withdraw cryptocurrencies or fiat to and from an exchange or wallet.
Are cryptocurrency money transfers free?
Some exchanges and platforms will allow you to send cryptocurrency from your wallet to another person’s wallet for free, whilst others will charge a minimal fee if using a blockchain to send the assets.
In most cases though, using cryptocurrency is one of the cheapest ways to send money abroad as you don’t have to pay the fees and foreign exchange rates associated with MTOs and banks.
For example, sending Bitcoin to another wallet costs an average of $1.5 per transaction and Ethereum an average of $0.75 per transaction, which is far cheaper than traditional methods of sending and receiving money abroad. As this can be sent to any wallet around the world, it provides a cheaper alternative.
Exchanges can also be cheaper. Most exchanges charge between 0.1-1.5% for sending assets to another wallet, which again works out cheaper than traditional options. For example, on Kinesis, you can send assets to another user for a flat 0.22% fee – making it another viable alternative to using a wallet or a bank/MTO to send money abroad.
How to send money from blockchain to a bank account
To withdraw cryptocurrency to a bank account, you’ll first need to convert the asset to a fiat currency via the exchange platform you’re using. From there, you can cash out the funds to a bank account using your bank details.
Use a card that supports cryptocurrency payments: These cards can be linked to your crypto wallet and used in the same way as any other debit card. When you use the card, it draws from your crypto wallet, converting it into fiat currency at the card’s exchange rate.
Spend it directly: A growing number of online and physical merchants are accepting cryptocurrencies such as Bitcoin and Ethereum as payment. This means you can shop online and pay directly using your crypto wallet using a card like the Kinesis Virtual Card.
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
Cryptocurrency provides an easy and cheaper way to send money to friends, family or business associates abroad. But what happens when market fluctuations impact the value of your crypto wallet?
One of the biggest arguments against using cryptocurrency is its inherent volatility. Kinesis presents an alternative digital currency backed by historically stable, physical assets – gold and silver bullion. Kinesis currencies combine the secure flexibility of cryptocurrency with the appreciating value of precious metals to minimise volatility and bring stability to your portfolio.
So, how do you get started?
The Kinesis Exchange is an easy-to-use platform where you can buy, sell and manage your digital currency portfolio, as well as fiat currencies.
Not only that, Kinesis has introduced the ‘send-to-email‘ feature that enables users to send digital assets to other account holders and those outside the Kinesis Monetary system with only the recipient’s email address needed as information for the transaction.
As a streamlined payment option for all Kinesis users, the ‘send-to-email’ feature can be used on both the Kinesis desktop and mobile application.
The exciting new functionality allows system participants to transfer digital assets, including Kinesis gold (KAU) and Kinesis silver (KAG), as well as Kinesis Velocity Token (KVT), to friends, family or business associates outside of the Kinesis Monetary System.
Open an account with Kinesis Money to start sending, spending, storing and trading digital currencies in one convenient interface.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.