As African central banks battle to keep cryptocurrencies out of the mainstream, more migrant workers are resorting to cryptocurrency-based money-transfer services.
As a result, crypto-assets like bitcoin are now considered as a “cheap means to transport money around the poor world.” Lockdown procedures planned in several nations beginning March 2020 contribute to the rising popularity of cryptocurrencies.
To combat the spread of Covid-19, governments worldwide enforced travel restrictions, which hampered the usual dependable money transfer methods. With restrictions on mobility, bitcoin and other cryptocurrencies have naturally arisen as the next safe and cost-effective option.
Various studies suggest a rise in bitcoin usage after March 20. Since then, several central banks have tried to stem the tide. For example, before the Nigerian Central Bank (CBN) banned banks from serving crypto consumers, remittances into the nation were rising. Conversely, government records reveal that typical remittances have hit historic lows.
According to several Nigerian crypto fans, the CBN’s move against the crypto business was prompted by the drop in remittances. For Nigerians receiving remittances via formal channels, the CBN recently proposed an incentive plan to slow the decline in cross-border remittances.
Bitcoin and the UN SDGs
Cryptocurrencies may so “beat hefty transaction fees of conventional money transfer businesses like Western Union and Moneygram,” as the Quartz Africa study recognizes. Similarly, a World Bank analysis identified Sub-Saharan Africa to be the world’s most costly area, with an average shipping cost of 8.47 percent in Q3 2020. This percentage is far over the SDG 10C objective of 3%.
A Chainalysis 2020 Geography of Cryptocurrency research indicates that many African expats use cryptocurrency to transfer money back home. “Roughly $562 million in cryptocurrencies was moved straight from abroad addresses to ones headquartered in Africa,” the research says.
Despite the fact that the $562 million number is unlikely to reflect all expat remittances, the blockchain research business indicates that many migrants choose cryptocurrency owing to the “low-fee remittances.” Citing South Africa to Nigeria and Malawi as examples, the paper says costs may reach 15% for “some country pairings that experience substantial remittance flows.”
Cheapest Remittance Fees with Cryptos
However, as Bitinfocharts data reveals, certain crypto assets’ network fees (or transaction charges) are a fraction of a dollar. For example, the 360,000+ transactions recorded on the Bitcoin Cash network on March 29 generated an average cost of $0.0032 per transaction. The figures show that each transaction was worth an average of $15,020.
African Migrants Use Cryptocurrency Platforms to Send Money Cheap
Other cryptocurrencies like XRP, dash, and stellar all have network costs much below the UN objective of 3%. To move money overseas, central banks and financial institutions must cooperate together to reduce remittance expenses. When there is no alternative, just banning cryptocurrencies will not work.