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Remittances: What Are They, and Why Are Cryptocurrencies the Ultimate Solution?
Have you ever wondered how you could send money to your loved ones abroad more quickly, efficiently, and economically? In the world of finance, remittances have traditionally provided a solution, especially in economies where sending money from other countries is necessary.
But, thanks to the cryptocurrency revolution, there is even more promise. In this article, we'll explain what remittances are and how cryptocurrencies like Bitcoin and Ethereum are reshaping this age-old financial practice, ushering in a new era of online remittances.
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What Are Remittances?
Remittances are money transfers made by migrants to their countries of origin. Often, these transfers represent an essential source of income for the families that receive them. In fact, in many countries, remittances exceed foreign aid and constitute a significant part of the GDP.
In more technical terms, remittances are a form of payment or collection that must be initiated through a financial institution, such as a bank. In other words, when there is a remittance, it means that there is an order for the institution or company to process the payment as soon as possible.
Whether it is a payment or collection remittance, the bank or institution serves as an intermediary and acts as a custodian of the funds until they reach their final destination. This is why the internet and technologies like blockchain have played a crucial role in improving the security and speed of remittance transfers and cross-border payments.
Types of Remittances
Traditionally, banks, financial institutions, and fintech companies consider two types of remittances.
- Payable on demand: These remittances involve physical means or documents, such as checks or payment receipts.
- Time remittances: These are the most common type, as they have a specified start date and a deadline for settlement by the institution.
When remittances began to evolve as a form of international payment, a new type was introduced alongside the traditional ones:
- Documentary remittances: Involving the transportation of commercial or financial documents, such as invoices, financial certificates, or insurance policies.
- In modern times, with enhanced security options like Blockchain, there is a new type of remittance that families are considering:
- Crypto remittances: These are managed, sent, and cashed using cryptocurrencies and digital currencies.
How Do Remittances Work? Traditional vs. Electronic
Historically, sending remittances involved visiting a specialized agency or bank, where fees were paid for the service, and often, delays were experienced due to reliance on multiple systems. Additionally, the recipient usually had to travel to a physical location to pick up the money and their payment order. This process could take days or even weeks, with fees consuming a significant portion of the amount sent.
With the advent of the Internet, banks started offering new services that eliminated many of these steps. By sending an international payment order, banks would manage the transaction, and the funds would be deposited within a few business days, with internal charges and country-specific taxes (such as VAT in the case of Mexico) applied. This method might be slightly more expensive than traditional ones, but the remittance would arrive as a wire transfer.
So, what is the new way of sending remittances? Cryptocurrencies. Thanks to digital currencies, sending these types of payments can bypass many of the disadvantages mentioned above, as they can be cheaper, faster, and more accessible.
Why Are Cryptocurrencies Transforming Remittances?
Cryptocurrency remittances address many of the issues associated with traditional remittances as we've discussed briefly. Moreover, thanks to the security offered by blockchain technology, users can protect these remittances even more effectively than with banks. Here are some of the advantages:
- Speed: Cryptocurrency remittances can be completed in a matter of minutes, regardless of the distance between the sender and the receiver.
- Fees: In many cases, sending crypto remittances is cheaper than using traditional methods, especially for international transfers.
- Accessibility: With a smartphone and internet access, anyone can send or receive cryptocurrencies without needing a bank account.
Remittances in Latin America: Cryptocurrencies as the Ultimate Solution
In 2023, remittances have gained even more significance than usual, primarily due to inflation. For instance, remittance records were shattered in Mexico during the post-pandemic years. However, as the Mexican peso began to strengthen, many noticed that remittances started to hold less value than before.
This is where cryptocurrencies can step in. By having the option to diversify their portfolios with currencies that have shown positive changes (such as Bitcoin), individuals can potentially achieve better results when converting them into Mexican pesos.
Argentina presents another unique case. Due to the high level of inflation, remittances nearly quadrupled in 2023. Families in need of funds from abroad view cryptocurrencies as a valuable ally, enabling them to gain even more benefits by diversifying their portfolios. In this specific scenario, stablecoins like USDT or USDP can prove advantageous, as they can be accumulated and sold when the market peaks.
Additionally, the cost of sending remittances plays a crucial role. The average fee for sending remittances from the United States to Mexico is USD 6, plus a 16% VAT tax. When using cryptocurrencies for remittance transfers, only a minimal transaction fee is required, and the entire amount reaches the recipients' accounts.
Why Consider Crypto Remittances? Some Useful Tips
When considering crypto remittances, it's crucial to maintain ongoing communication with your loved ones. Pay attention to critical aspects, like selecting the right cryptocurrency and where the accounts will be established for the transaction, as these details are essential to avoid encountering issues
- Choose a reliable wallet or exchange: To receive remittances, you need a dependable cryptocurrency platform as they serve as your bridge for receiving money. Ecosystems like TruBit offer quick crypto sending and receiving options, payment tools like cryptocurrency cards, and trading functions if you wish to grow your funds.
- Select the cryptocurrency for remittances: It's crucial to choose the right cryptocurrency for sending remittances. For instance, if you send Bitcoin, the recipient must receive Bitcoin. Bitcoin and Ethereum are the coins with the highest market capitalization, albeit with significant volatility. Alternatively, you can consider stablecoins, which are linked to currencies like the Dollar, Euro, or even Mexican or Argentinean pesos, ensuring they retain their value over time and can be spent when needed.
- Double-check your transactions: Cryptocurrency transactions involve using a deposit address, typically a lengthy alphanumeric code. The issue is that if you make an error when entering this address, the money is lost, as blockchain transactions are irreversible, and no one can assist in retrieving the funds.
TruBit: The Ideal Platform for Sending Remittances in LATAM
When it comes to selecting the right cryptocurrency platform for sending remittances, TruBit stands out as an excellent choice, particularly if you're in Latin America. This platform has been specifically tailored for the LATAM market, offering products and services designed with the needs of people from countries like Mexico, Argentina, Colombia, Brazil, and more in mind.
To begin with, TruBit is a comprehensive digital ecosystem offering a range of products tailored to your cryptocurrency needs. These include:
- Cryptocurrency Wallet: An ideal solution for sending and receiving remittances and serving as a digital payment method.
- Exchange: For those seeking professional cryptocurrency-related tools, TruBit offers an exchange that includes features like contracts, trading, spot options, and more.
Moreover, TruBit offers the TruBit Card, a Mastercard-backed card that enables you to make online payments and shop at hundreds of thousands of establishments worldwide. This card addresses the common concern that digital currencies may not be readily usable as real money, providing users with the convenience and versatility of traditional payment methods.
TruBit is fully regulated and registered in the countries where it operates, ensuring that all transactions are secure and compliant with local regulations. Additionally, TruBit provides customer support in your language to assist with any issues you may encounter.
However, the primary advantage of using TruBit for remittances is the speed and minimal transaction costs. In fact, if you send funds from one TruBit Wallet to another, the transaction is not only secure but also completely free and instantaneous.
Learn how easy it is to send cryptocurrencies with TruBit Wallet
Conclusions
Remittances have played a crucial role in the global economy for decades. However, the emergence of cryptocurrencies has ushered in a revolution in how money is sent across borders. With the promise of faster transactions, lower fees, and increased financial inclusion, crypto remittances are poised to become the ultimate solution for millions of people worldwide. Selecting a secure and trustworthy platform is of paramount importance when it comes to remittances. TruBit, a specialized platform in Latin America, adheres to all necessary regulations and security measures, ensuring a reliable and secure remittance experience.
FAQs about Remittances and Cryptocurrencies
- When is the best time to use cryptocurrencies for remittances?
- While cryptocurrencies offer numerous advantages, it is crucial to understand the market's volatility. It's advisable to stay informed and carefully assess risks, especially before conducting significant transactions.
- Where can I start using cryptocurrency remittances?
- There are multiple platforms and applications available for sending crypto remittances. Before choosing one, conduct research on factors like fees, transaction times, and their reputation in the market.
- How much can I save using cryptocurrencies for remittances?
- Savings can vary based on the transaction amount and the chosen platform. However, many users have reported significant savings, particularly when it comes to international transfers.
- Why choose cryptocurrencies over traditional methods?
- Cryptocurrency remittances offer not only speed and cost savings but also provide financial inclusion in regions where traditional banks are inaccessible. They also grant users full control over their funds without the need for intermediaries.
You may also be interested in 🔥
- Remittances: What Are They, and Why Are Cryptocurrencies the Ultimate Solution?
- What Are Remittances?
- Types of Remittances
- How Do Remittances Work? Traditional vs. Electronic
- Why Are Cryptocurrencies Transforming Remittances?
- Remittances in Latin America: Cryptocurrencies as the Ultimate Solution
- Why Consider Crypto Remittances? Some Useful Tips
- TruBit: The Ideal Platform for Sending Remittances in LATAM
- Conclusions
- FAQs about Remittances and Cryptocurrencies
- You may also be interested in 🔥