Using Bitcoin for Cross Border Payments & International Remittances
We live in an increasingly complex and interconnected world. International borders are becoming obsolete as most of us have travelled to another country, have friends and family living in other parts of the world, or have made online purchases from other countries. If you extrapolate this idea, one can argue that fiat currencies are antiquated in this borderless world. We need a currency that is accepted worldwide because most people are exposed to multiple currencies throughout their lifetime. Even Jack Dorsey, the founder and CEO of Twitter, believes that in the internet age, we need a currency that is native to the internet. The Euro is the first attempt at a currency that brings together multiple national economies, but it is failing because it relies on humans to set its monetary policy as opposed to having it set in place from the start.
Why Bitcoin is Best for International & Cross-Border Payment
All of this is to say that one of the best use cases for Bitcoin is to conduct cross-border payments. Bitcoin has several advantages over traditional payment rails when it comes to sending money across borders. Firstly, it is always online. Bitcoin has had a 99.98% uptime since its inception. Users are not dependent on bank business hours to get payments send out to the recipients. Oftentimes someone might want to send a remittance to a family member in a different country and time zone. In a non-Bitcoin world, that recipient would have to wait for the bank or payment remittance company to open the next day in order to receive their funds. This is not ideal in emergency situations.
The fact that Bitcoin is online 24/7 helps us eliminate factors such as different time zones and business hours when sending payments across borders. Bitcoin enables instant cross-border payments!
Bitcoin Exchanges Provide Liquidity
Instant, cross-border payments are great only so far as the recipient can easily transact with them. The instantaneous needs to be coupled with liquidity. People need to be able to either sell the Bitcoin for their local currency or buy goods and services directly with it. Most countries now either have online exchanges users sell their Bitcoin on or local peer to peer networks such as Local Bitcoins that can help provide liquidity. Billions of dollars a day of Bitcoin are traded daily. This is smaller than the foreign exchange market for fiat currencies, but nonetheless impressive considering Bitcoin has only been around for just over a decade. Instant payments coupled with liquidity make Bitcoin a perfect tool for cross-border payments.
Bitcoin Cuts Out the Expensive Middleman
One theme we will discuss a lot in this blog is how Bitcoin leads to the obsolescence of many of the financial middlemen we are accustomed to. The most important advantage Bitcoin has over traditional systems is that it eliminates the need for trusted middlemen. In the legacy system, incumbents such as Western Union charge high fees for smaller, more frequent transactions. Often, it is people working outside their home country sending money to family members in the home country. With Bitcoin, instead of paying fees to a middleman, the extra funds can be used by the people that need it most. Using Bitcoin also eliminates having to trust the third party. In theory, Western Union or any other remittance provider, can keep the funds and not complete the transaction. With Bitcoin, users can know and trust that the funds they are sending will end up in the hands of the person they want to send to. Using Bitcoin, people will be able to send any amount they want to anyone in the world for a few cents, the funds will arrive instantly, and the entire transaction will require no trust in any third parties.
Learn more about Bitcoin
The case for using Bitcoin is glaringly obvious to us and it is one of our core missions to educate our clients about all the different ways they can use this amazing technology. Follow The Coin Shack for more cryptocurrency tips from our experienced Bitcoin advisors in Toronto, Canada.