When you need to send your colleague a work message, you do it with a quick email. That’s how simple it is to send cryptocurrency as well which is not restricted by any physical boundary like a dollar or yen. Here, you are not limited by the fiat currency of any particular country. You can send money through crypto to your friends or family living cross-border just as conveniently as if they were located next to you.
In today’s global economy, cross-border payments have become extremely essential. There are some inefficiencies that exist in the traditional international transfers; read through this article to find out how these inefficiencies can be fixed using crypto cross-border payments.
How do crypto cross-border payments work?
Say you live in Dubai and want to send some money to your parents who reside in the UK. How will you make a crypto cross-border payment now?
- For this, you first need to find an “on-ramp” service provider who will take the fiat currency from you and then give you an equivalent amount of cryptocurrency for that amount.
- This exchange of fiat money for cryptocurrency will be done through a bank transfer and the crypto obtained will be stored safely in your crypto wallet.
- Of course, for a crypto wallet, you need to first create an account and choose a wallet from several different options that will be available to you.
- Next, you need to get the wallet address of your parents.
- Then you need to simply transfer the amount to that address in crypto.
- Once your parents have received the money in crypto, they can convert it back into the required fiat currency.
Why use crypto cross-border payments?
Here are some reasons why you should choose to make international transfers using cryptocurrency-
- No intermediaries involved
If you choose to transfer money across borders using the traditional payment method, there are too many intermediaries involved in the process. Conventionally, money is transferred internationally using the SWIFT system. If you use crypto for carrying out the transaction instead, it even enables you to automate the transaction.
By allowing direct peer to peer (P2P) transfers, in which crypto easily moves from one wallet to another, you can overcome the problem of delays in the transaction and speedily send money to your desired party. Even if you want to make a transfer as a business to another firm (B2B transaction), a crypto transfer will be an ideal way.
- Lower Transaction Fees
Crypto cross-border payments are a cheaper way of transferring money internationally compared to the traditional payment for international transfers. Since the need for middlemen in this process is removed, the cost that you will have to bear will also be lesser.
By choosing crypto, you can decrease the normal cross-border payment charge by 40-80%.
- Better Transparency
Using crypto for cross-border payments offer you a decentralized environment for making transfers as they are backed by blockchain technology. The use of distributed ledger technology makes the transfer more transparent as it maintains a record of each and every transaction. This makes sure that your money is securely transferred to the other party.
- Immediate International Transfers
When you choose to make cross-border payments through traditional banks, the process may take up to a week. If you live in Europe, this process can be faster but because of many intermediaries involved in the process, the time span elongates. If you want to make a transfer as a business, this prevents the smooth flow of cash. You can choose to make such cross-border payments through crypto because it offers a single path for the money to flow. It will save you from unnecessary delays caused due to third parties or from waiting for long hours.
With the world more globalized, crypto has emerged as an efficient way for making cross-border payments for individuals and businesses. While banks can start lowering their transaction fees in order to compete with the crypto transaction systems, the advantages that a blockchain backed payment system provides are much better than international transfers through traditional banks.
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