African Migrants Are Turning to Cryptocurrency Platforms for ‘Low-Fee Remittances’ – Emerging Markets Bitcoin News
As central banks on the African continent struggle to prevent cryptocurrencies from becoming mainstream, more and more migrant workers are turning to cryptocurrency payment platforms to transfer money across borders.
More than an investment
Thus, crypto assets like bitcoin are not only becoming a trendy investment for hedge funds and corporate moguls, but are also seen as a cheap way to move money around the developing world. Blockchain measures that will be introduced in many countries from March 2020 are also contributing to the growing popularity of cryptocurrencies.
In an effort to combat the spread of Covid-19, governments around the world have imposed restrictions on the movement of individuals, making normally reliable money transfer channels less accessible. With traffic severely restricted, bitcoin and other cryptocurrencies have naturally emerged as the next secure and cost-effective alternative for cross-border money transfers.
As several studies have shown, the use of cryptocorrelia has increased significantly since March 2020. Since then, some central banks have tried to test this growing popularity. For example, before the Central Bank of Nigeria (CBN) banned banks from serving customers with cryptocurrencies, the volume of remittances to Nigeria via cryptocurrencies was on the rise. On the other hand, official data shows that the volume of remittances through traditional channels has fallen to a historically low level.
According to some Nigerian crypto-enthusiasts, it was this interference (in money transfers) that prompted the CBN to take action against the crypto industry. The incentive scheme recently announced by the CBN for Nigerians who transfer money through formal channels is also an attempt to curb the persistent flight of foreign remittances.
Crypto currencies and the UN SDGs
At the same time, it is these minimal transaction fees of cryptocurrencies that allow them to outperform the exorbitant transaction fees of traditional money transfer companies like Western Union and Moneygram, as acknowledged in Quartz Africa’s report. Similarly, Bitcoin.com News reported in October 2020 that a World Bank study shows that sub-Saharan Africa is the most expensive region in the world, with average shipping costs of 8.47% in the third quarter of 2020. This is well above the 3% threshold set by the UN Sustainable Development Goal (SDG 10C).
On the other hand, the Chainalysis 2020 Geography of Cryptocurrency report also confirms that many African expats choose cryptocurrencies when sending money to the region. According to the report, the cryptocurrency was worth about $562 million. A total of $1.3 billion was transferred in bulk directly from overseas addresses to addresses in Africa.
While the Chainalysis report acknowledges that this figure ($562 million) likely doesn’t represent all remittances from expats, the blockchain analytics company believes that many migrants are choosing cryptocurrencies because of the low-failure-rate remittances. To illustrate this point, the report shows that for some country pairs where remittances are important, such as South Africa to Nigeria or South Africa to Malawi, fees can be as high as 15%.
Crypto currencies offer cheap money
However, as Bitinfocharts data shows, the network costs (or transaction costs) of some crypto assets like Bitcoin Cash (BCH), XRP and XlM are a very small fraction of a dollar. For example, on the 29th, an average commission of $0.0032 per transaction was charged for more than 360,000 transactions. March was recorded on the Bitcoin Cash network, realized. According to the data, each of these transactions had an average value of $15,020.
All other altcoins, such as XRP, Dash, and Stellar, also have network fees well below the UN’s 3% target. Unless central banks and financial institutions make an effort to lower the cost of remittances, the use of cryptocurrencies to send money abroad will continue to rise. Just banning cryptocurrencies or trying to kill them will do nothing if there is no alternative.
Do you agree that cryptocurrencies offer the cheapest streaming costs? You can share your thoughts below in the comments section.
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