Bitcoin tends to have an enticing use case in cross borders remittance. By utilizing cryptocurrencies as a fundamental medium to transfer funds internationally, senders and recipients can now complete the exchange without high remittance fees. However, if you are looking for a good trading platform, go for https://bitcode-prime.live as it is secure and reliable.
Cryptocurrencies seem to be the utmost awaited revolution in international exchange, and global trade will become a piece of cake after the mass adoption of these digital currencies. Yet the question remains, what are the strengths and threats of cryptocurrencies in terms of international exchange?
International Exchange: A Brief History – Overview
Several people have recently explored ingenious ideas involving different altcoins for international exchange. However, digital currencies, which serve as payment and transfer mediums between countries, are often overlooked as a solution to increase overall economic growth.
However, it is difficult to ignore that trade facilitation acts as a catalyst that brings benefits and value to various parts of the world. The World Trade Organization (WTO) claims that around half a billion people save on annual costs from trade in goods and services. Statistics also indicate that trade volume has doubled since the 1980s due to the globalization of the economy and trade facilitation.
In this regard, the usage of digital currencies is expected to become an essential element in international exchange. Using different cryptocurrencies will allow people on different sides of international expenses to pay each other directly without being concerned about the high transaction fees incurred in fiat exchanges.
Moreover, government regulation and taxation will not apply to people who use cryptocurrencies as a medium for international exchange. Therefore, it is easy to see that people are now looking forward to utilizing these digital currencies to facilitate cross-border trade and financial transfers between countries. Let’s discuss how cryptocurrencies have eased international exchange so far and how they revolutionize global trade.
How Cryptocurrencies Have Eased International Exchange
The use of cryptocurrencies is expected to emerge as a promising alternative to traditional international exchange processes. Introducing digital currencies offers a more efficient means to complete cross-border transactions. Moreover, unlike fiat currency, cryptocurrencies are easily transferable and borderless – they do not fall under the regulations of any governing authority or jurisdiction. Therefore, people can make payments without leading to high transaction fees, even in remittance exchanges.
Cryptocurrencies resolve high remittance fees.
Remittance is likely to be the largest source of income for many countries, which can be problematic when you need to pay your employees or relatives in other countries. In addition, many people send money internationally through banks and financial institutions that usually charge high fees from their customers.
However, cryptocurrencies such as Bitcoin have been designed in a manner that has led to remittance exchanges without any hassle or worries about the cost charged and how much is being paid by the sender on behalf of the recipient. Using such currencies has allowed people to make cross-border transactions without paying hefty charges.
Digital currencies can relieve the matters of de-risking
International banks have been facing the issue of de-risking where some countries, mainly in Africa and Asia, have been cut off from global financial networks. Furthermore, low credit ratings have become an obstacle for developing countries to receive aid from international donors or financial institutions.
However, even if a country has a low economic rating which makes its citizens ineligible for international aid, digital currencies can help solve this problem. By exchanging the digital currency with fiat in other countries, citizens can now receive their funds from overseas, and there are no problems with the international exchange of remittances.
Cryptocurrencies will make intermediaries redundant.
Intermediaries make up a big part of the global economy as they act as agents facilitating trade between two parties. However, digital currencies are borderless and do not fall under the regulations of any governing authority.
Intermediaries also get paid a fee when they exchange funds between two parties while using fiat currency in remittance exchanges. However, the only fee people are likely to pay if they use cryptocurrencies is a mining fee or mining expense which is usually negligible.
Cryptocurrencies offer an alternative for credit information for trade finance.
When companies and individuals approach loans from banks and investors, the latter often conduct credit checks to ensure no risk before providing a loan. However, in some countries where credit information is not available or valid, it becomes tough for people to get loans. In such situations, international financial institutions may carry out mobile money accounts linked to national identification systems, which can then be used as a proxy for credit information.
However, digital currencies can also be used as an alternative for trade finance as they are easier and faster to process for international exchange. In addition, using these virtual currencies in remittance exchanges between countries will make it more accessible for people to receive their funds without having any credit rating issues.