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?
But before we look at how to use crypto 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 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.
Bitcoin is the most widely known cryptocurrency, but there are over 6,000 cryptos around today and this figure is growing steadily. Other big players in the market include Ethereum, Ripple and Cardano.
Blockchain is the technology underpinning cryptocurrency. It’s a shared ledger (known as the ‘blockchain’) that records transactions of digital assets like cryptocurrencies.
On the blockchain, all virtual currency is traceable, which means 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 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.
Not surprisingly, this approach is expensive. In Q1 2021, the global average cost to send money overseas was 6.38%. 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 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:
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 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
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 in any capacity 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 utilised 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.
