Cryptocurrency and Remittances – An Overview of Opportunities and Projects

Remittances have long been hailed as one of the biggest global opportunities for cryptocurrencies such as Bitcoin. For those readers who are not familiar with the term, a remittance is when a migrant worker sends money home to their family members still living in their home country, and the term is often used more loosely to refer to all international payments sent by an individual and received by an individual without going through bank transfers but instead using services such as Western Union or MoneyGram.

These remittance services often allow the recipient to pick up the money which is sent to them from an agent at a physical location, meaning that they can be used by the so-called 'un-banked' – people in poor communities who do not have access to traditional banking services. In Africa remittance services such as M-Pesa, which use mobile phones – allowing people to send money as easily as they would sent a text message – have become very popular.

In 2010 the World Bank estimated the total size of the global remittance market to be $440 billion USD. That clearly makes this a huge business, and it is also a business that is ripe for revolution from new and disruptive technology such as cryptocurrency. Sending international payments is an expensive thing to do, whether you use a bank wire transfer or a remittance service such as Western Union. The fees for sending money are usually 5% or higher, and if you take the bank wire transfer route they will usually take several days to complete as well. Cryptocurrencies can be used to send money anywhere in the world with minimal costs and a near instant transaction time, which constitutes a major improvement over the status quo. Cryptocurrency is therefore seen as having a huge potential to revolutionize the remittances business, and vice versa, the remittances market has a huge potential to be one of the major drivers leading to mass public adoption of digital currencies such as Bitcoin.

There are, however, significant barriers in the way of this happening. Perhaps the biggest barrier is providing a way for people living in developing countries to both receive coins, and to either spend them or cash them in for their national fiat money at a fair price. Many of the un-banked or under-banked people who receive remittances do have their own mobile phone, but may not have reliable and secure access to the internet (many use internet cafes, which are not ideal for managing finances due to the risk of security breaches by hackers). Also, in many developing countries the number of businesses accepting Bitcoin or other cryptocurreny payments or offering to purchase digital currencies for cash in a face-to-face transaction is either limited or non existent.

Fortunately there are a number of businesses who are already working to overcome these challenges and bring the inherent benefits of digital money to the global remittance market.


Perhaps the biggest name in this are right now is BitPesa, a company which is obviously inspired by the popular Kenyan money transfer service M-Pesa and which aims to provide its customers with an easy to use and low cost tool for making international payments using Bitcoin via a mobile phone.

Currently BitPesa only serves the Kenyan market. It effectively acts as a kind of Bitcoin exchange, which buys Bitcoin for Kenyan Shillings (KES). To use this service a person wanting to send money would simply send Bitcoins to the BitPesa exchange along with the mobile phone number of the intended recipient. These Bitcoins are then converted into Kenyan shillings and paid to the mobile phone wallet of the recipient. Mobile wallets from M-Pesa, Orange, Yu and Airtel are compatible with this service. BitPesa charges 3% on the exchange rate between Bitcoins and Kenyan shillings, making the cost of this service significantly lower than the cost of using established competitors such as Western Union.


Another emerging service which has gained some publicity recently is TXTCoinsNow. This service provides a platform through which customers can send a wide range of cryptocurrencies via text message. The company also provides an optional escrow service and tools for merchants wishing to accept mobile phone payments, but does not offer to convert cryptocurrencies into fiat money. The company claims to be focussed on remittances and to be heavily targetting Africa.

Compared to BitPesa it seems that this service aims to provide an alternative to mobile wallet services such as M-Pesa using digital currency, rather than a means for people to send money to M-Pesa users. They are actively seeking local agents who would buy digital currency via mobile phone payments in return for national fiat money, as well as local merchants willing to accept digital currency payments.

TXTCoinNow is built on the NXT platform, and uses NXT coins for payment of transaction fees.


Ripple is a 'currency agnostic' payments protocol which creates digital currency 'IOUs' to allow people to send and receive international payments denominated in national fiat currencies or cryptocurrencies with minimal cost. Although Ripple is not exactly a cryptocurrency itself it does uses cryptography, a distributed ledger for confirming transactions, and a peer to peer network for sending payments – and also does include its own digital currency called Ripples or XRP.

In order for a currency to be available on the Ripple network there needs to be one or more 'gateway' provider – a business which accepts fiat deposits and issues Ripple IOUs, and in the other direction redeems those IOUs for a fiat money withdrawal.

There are may possible applications for Ripple, but the remittance market has long been regarded as one if its biggest potential use cases.

To use Ripple for sending money abroad a person would deposit their national fiat currency at a local gateway and then specify the currency they want the recipient to receive when sending the payment. The Ripple 'path finding' system will then find the best path to make the currency conversion on the peer to peer market (perhaps a direct conversion, or perhaps going through more than one step). The recipient would then withdraw their own national fiat from a local gateway in their country.

Most Ripple gateways charge fees for both deposits and withdrawals, which can vary greatly but are often in the 1-2% range. As the transaction fee for actually sending the money is tiny (way less than a single cent), this would make the total cost of using Ripple like this around 2-4% on average. Some gateways, such as the recently launched Ripple LatAm which serves Latin America and processes payments in a wide range of currencies seem to be actively targetting the international money transfer business.

There are, however, a couple of major barriers in the way of Ripple being used for remittances. The first is the fact that most gateways only process withdrawals to bank accounts – meaning that the 'un-banked' would find it difficult to cash out their payment. A recent announcement by CEO Chris Larsen to establish a substantial 9 billion XRP fund for the under-banked may change this, but no details have been announced as of this point in time. Another issue is the fact that orderbooks on the peer to peer market can be very thin and unpredictable at the moment, which means that the exchange rates you will get can vary greatly, especially for larger amounts. On one day you may be able to make an exchange for better than market rates (a few weeks ago I bought some Brazillian Reals very cheaply from Ripple LatAm), whilst on other days you may have to pay way over the odds for the same conversion. Only time will tell whether a large enough market of peer to peer traders will emerge to make this system viable for regular users.

Categories: Business | Finance | E-Currency | Cryptocurrency | Bitcoin

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