Are you looking for a quick, cost-effective, and safe way to send money abroad? Cryptocurrency is the answer!
With advanced blockchain technology, you can now send money across borders to loved ones in just minutes—no more worrying about high transfer fees or lengthy waiting times.
Modern, convenient, and with superior security—cryptocurrency is ushering in a new era for international payments. Explore it today! 🚀🌍
Key points
Cryptocurrency significantly reduces the high fees and lengthy processing times associated with traditional money transfer methods, providing near-instant money transfer services at minimal costs.
Cryptocurrency enables seamless international money transfers, especially in areas with limited banking infrastructure or during crises like conflict or economic instability.
Using advanced blockchain technology, cryptocurrency eliminates intermediaries, ensuring faster, safer money transfers without bank delays or holidays.
To ensure a smooth transaction, carefully check the wallet address, use a secure platform, understand blockchain fees, and comply with local regulations to avoid complications.
On May 22, 2010, Laszlo Hanyecz made history by using Bitcoin to buy two Papa John's pizzas, trading 10,000 Bitcoins, which at the time was worth only $25 — for delivery. At that time, few knew that cryptocurrency would emerge as a viable solution for international money transfers.
But why is cryptocurrency being considered for cross-border transactions?
Traditional money transfer methods have high fees and lengthy processing times. For instance, if you are in the UK, sending £1,000 to Los Angeles via bank may cost you £10 to £15 in fees (depending on the chosen bank), and the processing time can be really cumbersome — often taking several working days.
While fintech solutions like Wise and Revolut have helped reduce transaction costs (ranging from £1.50 to £4.66) and processing times (often instant), many still struggle to access these services.
This article explores the use of cryptocurrency to send money to family and friends abroad, highlighting the advantages of using cryptocurrency for cross-border payments.
Why is sending money abroad so expensive?
Sending fiat money globally is very expensive because there are multiple layers of fees, including transfer fees, intermediary bank fees, recipient bank fees, and exchange rate margins. On average, your bank charges 2%-4% of the total amount transferred just for transfer fees.
Additionally, international bank transfer transactions often go through networks like SWIFT (Society for Worldwide Interbank Financial Telecommunication), connecting banks globally for communication and transactions. As money moves through multiple banks—often to convert currencies or to streamline money transfers—intermediary banks add fees to process these transactions.
Necessary conditions for sending cryptocurrency safely and efficiently
. Understand cryptocurrency
Before making a transaction, you need:
Master the basic concepts of cryptocurrency such as Bitcoin (BTC), Ether (ETH), or popular stablecoins like Tether (USDT).
Understand how cryptocurrency wallets, exchanges, transaction fees, and the block confirmation process work.
Always monitor the volatility and risks in the cryptocurrency market to plan accordingly.
. Set up a secure cryptocurrency wallet
Custodial wallet: Managed by a third party, easy to use but you do not have complete control over your private key.
Non-custodial wallet: Provides absolute control over your private key, suitable for those who prioritize security and are willing to take responsibility for managing their private keys.
Hardware or software wallet: Depending on your security needs and convenience, you can choose a hardware or software wallet to better protect your assets.
. Choose the right trading platform
Choose a reputable exchange with low fees and robust security mechanisms.
Ensure the exchange supports the fiat currency you are using for easy conversion to cryptocurrency.
Complete the KYC (Know Your Customer) identity verification steps and registration process to comply with current legal regulations.
=> By mastering these prerequisites, you will be ready to leverage cryptocurrency as a quick, safe, and cost-effective tool for international money transfers! 🚀
How to send money abroad using cryptocurrency
To send money globally using cryptocurrency, follow these steps. This example uses the Binance app for illustration.
Step 1: Set up a cryptocurrency wallet
Choose an exchange or wallet compatible with the type of cryptocurrency you intend to send. Secure your wallet by setting up a recovery phrase and enabling security features like two-factor authentication (2FA).
Step 2: Buy cryptocurrency
Transfer the necessary fiat amount to the platform to buy the cryptocurrency you intend to send. Some wallets allow you to purchase cryptocurrency simply by linking your fiat account. You will need to pay conversion fees to convert, so make sure that the cryptocurrency you buy includes this.
Step 3: Get the recipient's wallet address
Confirm the recipient's wallet address. It is crucial that the transaction is error-free because it cannot be reversed.
Step 4: Initiate and complete the transaction
Click on the 'Withdraw' button.
Copy the recipient's wallet address, paste it into the address field, and enter the amount you want to transfer. Review all transaction details, including network fees. Choose a higher fee if you need the transaction to be faster.
Click 'Send'. The platform will require confirmation before sending the amount to the recipient's address. The money will arrive within minutes.
Step 5: Notify the recipient
Notify the recipient that the transaction has been completed and share the transaction ID for tracking if necessary.
Cryptocurrency transfer platforms
There are various ways or platforms to carry out cryptocurrency transfers, including:
Cryptocurrency exchange: They allow users to buy, sell, and trade cryptocurrencies. They act as intermediaries, providing a safe environment for these transactions. Binance and Coinbase are examples of cryptocurrency exchanges.
Peer-to-peer (P2P) platforms: They facilitate direct cryptocurrency transactions between individuals. This decentralized approach eliminates the need for intermediaries, offering more control and potential cost savings. Binance P2P is an example of a P2P cryptocurrency exchange.
Mobile applications: Mobile apps for cryptocurrency transfers leverage blockchain technology to enable quick and affordable international money transfers. These apps streamline the process, making it convenient for users to send and receive money across borders. Strike and Cash App are examples of mobile applications you can use to transfer cryptocurrency.
Is cross-border payment using cryptocurrency really an effective alternative to traditional money transfer methods?
The best way to understand whether cross-border payments using cryptocurrency are more effective than traditional methods is to consider it from the user's perspective, as they are the end consumers of both services.
So, let's consider some examples to assess the advantages of using cryptocurrency compared to traditional payment methods.
Example 1: How cryptocurrency payments outperform Western Union and traditional money transfer methods
A Reddit post highlighted how cross-border payments using cryptocurrency are often underestimated. A user shared their feedback experience for a platform abroad, where they used their ETH address to prove their identity and received USD Coin payment.
Transaction fees are only $0.008869 and the payment time is just two seconds. This is in stark contrast to traditional services like Western Union or bank transfers, which involve complex processes, banks in multiple countries, payment networks, and cumbersome paperwork, making cryptocurrency payments a much more efficient alternative.
Example 2: Stellar (XLM) has become the ideal choice for cost-effective money transfers.
There is another example of transferring money on Reddit when a user needed to send some money home for renovations. They were frustrated because almost every option using the fiat payment network was very costly before sending money to the recipient. For example, Western Union requires users to pay $10-$12 for every $200 sent. The Redditor also discovered that this platform exploited the volatility of exchange rates during the transfer process to charge an additional 1%-2%.
When using money transfer organizations (MTOs) and online banks, transactions are said to take two to three days and they charge fees ranging from 3% to 5%. On PayPal, the fee is around 10%.
In this case, users find cryptocurrency to be the best available option. Using cryptocurrencies like Stellar for transactions, they pay negligible fees and faster than any of the above methods. Even after considering the inbound and outbound fees, the total cost is still lower than other options.
The benefits of sending money using cryptocurrency
As noted above, using cryptocurrency to transfer money offers many advantages:
Lower fees and faster transfers: Unlike traditional banking systems that may charge high fees and take days to process, cryptocurrency transactions are completed within minutes at a fraction of the cost.
Avoiding currency exchange hassles: With cryptocurrency, you can avoid issues related to currency exchange. Sending money using cryptocurrency eliminates the need to convert between fiat currencies, saving you time and any losses due to unfavorable exchange rates.
No intermediaries or bank delays: Transactions are conducted directly between the sender and recipient through blockchain technology, with no role for banks. This helps you avoid delays caused by bank holidays or system downtimes.
How can the recipient withdraw cryptocurrency?
Cryptocurrency users can withdraw money using a cryptocurrency exchange or cryptocurrency ATM or spend directly if the unit accepts cryptocurrency.
If you have received cryptocurrency on an exchange, you can sell it on the same platform for fiat money. However, be prepared to incur cryptocurrency transaction fees. You also need to consider the spread, which reflects the difference between the asking price and the bidding price of a cryptocurrency.
This spread is dynamic and influenced by several factors, including the specific cryptocurrency, the trading platform used, the trading agreement between brokers, market volatility, liquidity levels, transaction fees, and trading volume.
Conversely, if you receive cryptocurrency through an exchange, you can easily sell it for fiat money on the same platform.
Cryptocurrency ATMs can be quite convenient for withdrawing your cryptocurrency. If there is a cryptocurrency ATM locally that supports the type of cryptocurrency you received, you can withdraw cryptocurrency there.
However, if you are lucky enough to find a unit that accepts cryptocurrency payments, you can spend your cryptocurrency there without needing to convert.
How does cryptocurrency address the main challenges in international money transfers?
Cryptocurrency provides a powerful solution to the challenges of traditional international money transfers:
Overcoming financial exclusion
Using cryptocurrency also allows you to send money to family and friends in areas with limited banking infrastructure and overcome financial exclusion barriers. Many regions, especially in Africa and South America, have limited banking infrastructure or face restrictions due to sanctions or unstable economies.
In Venezuela, people avoid hyperinflation and sanctions by receiving remittances in BTC or USDt, ensuring value preservation and quick access to funds. In September 2021, El Salvador officially adopted Bitcoin as legal tender to improve citizens' access to financial services.
Removing barriers for unbanked individuals
Lack of documentation is a major reason many people do not have access to banking services. Without identity and address verification documents, accessing fiat currency platforms like Wise or Revolut becomes impossible as these platforms must comply with strict regulatory requirements.
However, they can send and receive money using cryptocurrency platforms, especially decentralized exchanges (DEX).
Minimizing delays and costs
Migrant workers in countries like the UAE or Singapore frequently send money home to families in countries like India, the Philippines, or Nigeria. Sending through fiat channels leads to delayed transfers (two to five working days) and transaction fees of up to 10%.
On the other hand, the average transaction cost on the Solana blockchain is about $0.00025. The transaction confirmation time is about five seconds.
Send emergency relief funds to conflict areas
In the event of conflicts, such as in Ukraine or Afghanistan, banking systems often shut down or international money transfer services cease operations. Refugees and families use cryptocurrency to receive emergency funds immediately when the local banking system collapses.
Provide quick relief in disasters
Ethereum co-founder Vitalik Buterin significantly contributed to the COVID-19 relief fund in India, initiated by Polygon founder Sandeep Nailwal.
In May 2021, he donated 50 trillion Shiba Inu tokens valued at $1.2 billion at the time. Previously, Buterin had donated about $600,000 in ETH and Maker tokens in April.
Removing tight capital control measures
Countries often impose strict capital controls or freeze accounts during times of financial instability. For example, after the economic crises in Greece and Lebanon in 2009 and 2019, governments implemented stringent financial measures. Receiving and sending money using fiat currency often becomes troublesome in such situations, but cryptocurrency provides a way to navigate this.
Did you know? By November 2024, Bitcoin's market capitalization reached nearly $2 trillion, surpassing the $1.7 trillion market capitalization of silver and establishing itself as a major global asset.
Compare cross-border payment systems: Traditional banks vs. fintech platforms vs. blockchain networks
Traditional banks, fintech platforms like PayPal, and blockchain networks like Ethereum and Tron all have their own features and limitations.
Banks provide managed but costly and slow means, while PayPal is faster but charges significant fees. On the other hand, the blockchain network offers borderless, cost-effective alternatives with varied transaction speeds and scalability.
Below is a comparison table of cross-border payment systems:
Tips for safe and effective cryptocurrency transfers
Ensuring the safety of your cryptocurrency transfer is important. Here are some tips to keep your cryptocurrency transfer safe and efficient:
Double-check the wallet address: Before sending money, ensure the recipient's address is correct. Transactions are irreversible, so even a small error can cause you to lose money.
Use a reputable platform: To transfer cryptocurrency, use an established platform like Binance or Coinbase. These platforms provide a secure infrastructure while minimizing the risk of fraud or technical issues.
Enable 2FA: Enabling 2FA on your wallet and exchange will add an additional layer of security and reduce unauthorized access to your account.
Consider network fees and speed: Understand the costs and transmission speeds of different blockchains. For example, Bitcoin will take longer to process transactions and charge higher fees compared to next-generation blockchains like Solana or Polygon.
Secure your wallet: Whether you are using a hot or cold wallet, ensure that your wallet software is regularly updated to avoid security vulnerabilities.
Common challenges in cryptocurrency transfers and how to overcome them
If you are new to cryptocurrency payments, you may encounter the following issues:
Network congestion and delays: Issues such as network congestion and delays occur during peak transaction demand, leading to slower processing times. To mitigate this, you can prioritize transactions with higher gas prices, resulting in faster confirmations during peak times.
Volatility: Cryptocurrency volatility reduces the value of payments in transit. To avoid volatility and ensure value consistency, you can use stablecoins like USDt or USDC.
Wallet address error: If you enter the wrong address, it may lead to permanent loss. Always double-check the recipient's address or use a QR code to ensure accuracy.
Regulatory barriers: If you are not aware of the regulatory environment in your jurisdiction, you may encounter unexpected barriers when sending. To avoid issues, stay updated on local regulations and comply with them.
When sending money to family and friends using cryptocurrency, being proactive helps the transaction go more smoothly, securely, and reliably. Small details like adjusting gas fees, using stablecoins, and double-checking can avoid hassles and ensure the money reaches the recipient.
Are there tax implications when sending cryptocurrency abroad?
Sending cryptocurrency abroad will have tax implications depending on the country. In the United States, the IRS recognizes cryptocurrency as property; thus, transferring money may result in capital gains tax if its value has increased since acquisition.
In the UK, the HM Revenue and Customs (HMRC) considers such transactions to be taxable if the profit exceeds the annual tax-free allowance.
Japan taxes cryptocurrency income at a progressive rate, classifying it as miscellaneous income. In contrast, Singapore does not tax capital gains, but may tax businesses interacting with cryptocurrency, while the UAE does not tax personal income, making it a cryptocurrency-friendly country.
No matter where you are, keeping detailed records of transactions is crucial for compliance. Refer to local tax standards or professionals to ensure accurate reporting and avoid penalties.
