A Billion Here, a Billion There: Crypto Remittances Are Suddenly Real Money

When foreign workers send money home, banks take a cut. Till crypto.


Murtaza Hussain

Aug 3, 2021 • 7 min read

Every day, millions of foreign workers around the world, many of them citizens of low-income countries, transmit a portion of their hard-earned wages back to family members and friends living in their countries of origin. These remittance payments are an economic lifeline for ascending-world countries like the Philippines, Mexico, and Bangladesh, who rely on the millions of their citizens working abroad to supply necessary capital inflows and to provide for their communities at home.

For foreign workers budgeting what they need to survive abroad while also saving and providing for their families back home, every dollar counts. But the unfortunate reality of the present financial system is that international remittances remain hugely expensive, cutting significant margins out of what are often small salaries earned by foreign workers to begin with.

Crypto remittances have been talked about as an answer to this problem for most of the last decade. The idea was interesting but always premised on global crypto adoption. Over the past few years, it has actually begun to work.

  • Africa. According to figures from Chainanalysis, roughly “$562 million worth of cryptocurrency was transferred directly from overseas addresses to ones based in Africa in retail-sized payments,” in the year 2020. That number likely represents just a portion of the total amount of crypto remitted to Africa during that time. Nigeria is so worried about the popularity of unlicensed remittances there that the government is actually paying people to avoid crypto when sending money.
  • Latin America. In the United States, foreign workers from Latin America have been using crypto exchanges as a means of sending salaries back home instantly and at minimal cost, while sidestepping the international transfer companies that have gotten comfortable with their privileged middlemen roles in the system. Many Latin American leaders have expressed their support for cryptocurrency in general and Bitcoin in particular. Bitcoin payments sent to the region more than doubled from under $1.5 Billion in 2019 to over $3 billion in 2020.
  • Asia. Workers sending money back to smaller economies like Indonesia and the Philippines have flocked to crypto in recent years. One popular blockchain used for cross-border payments in Southeast Asia saw its transaction volume increase tenfold in 2020.

Like the One Laptop Per Child Project — which started life as an implausible boondoggle, but is now fully realized in the form of the smartphone revolution — crypto is finally beginning to eat into the tolls that financial middlemen have extracted from foreign workers.

Remittances are a big business

According to World Bank figures, officially-recorded remittance flows to low and middle-income countries were around $540 billion in 2020 – a number that was barely dented from its previous year total of $548 billion by the COVID pandemic. These figures are expected to rise fast in the years to come as globalization continues to accelerate, with Allied Market Research estimating that by 2026 the total value of remittances sent globally will reach roughly $930 billion.

Banks and other institutions that act as critical nodes in the international payments network are perfectly positioned to collect fat tolls on all that remittance money, and they exploit that position to the fullest.

  • Remittance Prices Worldwide, a publication of the World Bank, reports that the global average fee cost of sending a remittance payment, whether through a bank, by post office, or through a dedicated transfer service like Western Union, was around 6.38 percent in the first quarter of 2021, based on an average retail transaction of $200.
  • That same World Bank report also noted the continued exploitative role of banks, noting that “banks remain the most expensive type of service provider, with an average cost of 10.66 percent,” for sending a small remittance.

As other studies have pointed out, the cost of sending money across borders, even intra-regionally, in some parts of the world can go much higher, running up to 20 percent in some sub-Saharan African countries.

Tracking the full scope and cost of remittances is a challenge because not all countries keep track of data and doing complete record-keeping of such a sprawling worldwide phenomenon is an inherently daunting task. But the United Nations has done its best to monitor the subject, including the question of how much fees that remittance companies are taking from workers for their transactions, coming back with staggering estimates that peg total fees as running into the tens of billions of dollars annually.

Meanwhile, efforts to reduce the average fee of sending a remittance to the UN goal of around 3 percent – a reduction that would save around $20 billion worldwide – have proven stubbornly difficult to meet.

These fees on remittance payments represent money that continues to be taken by financial middlemen from some of the poorest and most hardworking people on the planet for no reason other than that these institutions control the legacy infrastructure needed to move wealth around the world. Instead of being wasted on remittance fees, in a better system those billions could instead be used for savings, education spending, and economic development in ascending-world countries.

Crypto is cutting out the middlemen

Like many people who’ve spent time in rising countries in Asia, Africa, and Latin America, I’ve noticed the incredible mixture of tech-savvy and determination that you can find in even the poorest places.

Though billions still lack access to banking services or remain at the mercy of exploitative financial middlemen, smartphone usage has spread like wildfire in recent years. By the middle of this decade the vast majority of people on earth are expected to have access to a smartphone – the only technology needed to transmit, store, and save the value of their labor via decentralized crypto-based financial services, stablecoins, or directly on the Bitcoin and Ethereum blockchains.

While U.S. politicians struggle to make up their minds about crypto, foreign workers have been taking things into their own hands and using it as a tool to avoid the exorbitant remittance fees that have plagued them for years.

As a story in the April issue of the global tech publication Rest of World about Maria Salgado, a Mexican worker in the U.S., highlighted, “Before Bitcoin, like most migrants, she would send her money via the international transfer companies Western Union, MoneyGram, or Vigo. They all charged her, on average, $10 for every $200 she sent. Meanwhile, companies like Mexican crypto exchange Bitso charge commissions as low as $1 per $1,000 sent.”

Across sub-Saharan Africa, home to eight out of ten of the countries with the world’s fastest growing migrant populations, people are also beginning to take advantage of crypto exchanges and blockchain technology to protect their wealth from being needlessly eaten up by fees when sending money back home.

While it’s still dwarfed by the nearly $50 billion in fiat sent as remittances to Africa on an annual basis, the use of crypto is growing fast among people who are attracted by not just the possibility of saving huge amounts on fees, but avoiding foreign exchange risks in countries with historically unstable currencies.

DeFi innovation will cut costs more

Continued innovation in decentralized finance and cryptocurrency that helps cut down or eliminate the more than 6 percent average cost of sending a remittance worldwide will mean savings of billions of dollars for people in ascending world countries. It will potentially help hundreds of millions of working people who rely on remittances cross the threshold from poverty to economic stability in their own lives and could lift up entire countries.

The nation of El Salvador, which recently passed a law treating Bitcoin as legal tender, relies on remittance payments for over a fifth of its GDP according to figures from the World Bank. The implementation of its program to build Bitcoin into its national economy, if successful, could help give the country a major leg up in Latin America, make lives easier for its millions of foreign workers abroad and their families, and serve as an inspiration to the many countries around the world dealing with histories of currency instability, as well as the inherited power that global banks and financial services companies wield over their nations.

Crypto and blockchain technology offers migrant workers around the world the opportunity to save money on fees by cutting out middlemen, radically accelerating the speed of their transactions, and increasing security and peace of mind when sending their hard-earned salaries across borders back to their families. Above all, it offers the opportunity of a fairer world, powered by cellphones and the internet, where being born in Lagos, Dhaka, or Manilla, no longer means being forced to play by a set of unfair rules that keeps the door to progress barred. The technology is already in place to make this change possible. The only question now is how fast this new world can emerge.

Task: Earn $100 in BTC

Help us crowdsource crypto remittance data.

We're looking for up-to-date datasets, rendered in graph form, on the use of crypto for remittance payments. We'll pay out up to ten prizes of $100 in BTC for each original graph of remittance data for 2020 and afterward that we accept.

Each submission should also include a link to the data source that the graph was built from.

🏆 Winners: Best Graphs

Several submissions received $100 in BTC for their original graphs of remittance data. See a few of them below.