on the crypto
According to the World Bank, Latin America's formal remittance market is approximately $ 96 billion. But traditional services like Moneygram or Western Union can lead to high fees, unfavorable exchange rates, limited office hours, long airtime, and daily exchange limits. Crypto remittances are another story altogether, with transactions often faster and cheaper than their traditional financial counterparts, with fewer steps to send money.
Unofficial remittance markets
While cryptocurrency remittances may be less cumbersome than traditional remittances, cryptocurrencies remain an unknown to many people and, depending on the country from which the funds are sent, complicated and expensive.
To get around this, a new market has emerged, where individuals can create an unofficial cross-border remittance round using BTC (here quotation in real time) and USDT (USDT). Often customers don't even know that bitcoin is used to send remittances, and they probably wouldn't understand it anyway.
Venezuela
Between 2016 and November 2019, nearly 4,6 million Venezuelans moved to other countries, mostly to Latin America and the Caribbean, according to data from the United Nations High Commissioner for Refugees (UNHCR), possibly on the run the country's economic or political crisis.
This diaspora generates demand for remittance services: Venezuelans abroad can send money to their families at home, using the local currency of their new country of residence. Small businesses, ranging from individuals handling transactions to startups like Valiu and Reserve, help people make these cryptocurrency transfers.
According to various local analyzes, remittances will decline by nearly half from $ 3,7 billion in 2019 to $ 1,9 billion this year. This is partly due to the impact of COVID-19 that people simply have less money to send.
A spokesperson for Chainalysis reported that there is no way to verify whether these are actually remittances because it is not possible to ask a person to disclose the intention behind a transfer.
Regional Trends in Latin America
Mexico holds the largest share of the remittance market in Latin America. Emigration to the United States has formed a substantial official remittance industry where there is high competition, and where there is little room for cryptocurrency remittances made by unofficial operators.
In 2019, the United States received nearly 3 million Cuban immigrants, but due to sanctions the remittance industry has become complicated, as we have seen with the recent restrictions on Western Union.
This is just a stronger reason for sending cryptocurrency remittances. The most tech-savvy Cubans are moving closer to bitcoin, as it is a digital currency resistant to geopolitical problems or government regulations.
There are several businesses operating in Cuba that try to offer a way to send remittances while avoiding direct interaction with the Cuban or US government. These examples highlight the potential of cryptocurrency to transfer value between countries with geopolitical conflicts or from countries that restrict the movement of capital across borders.
