Remittance

Cryptocurrencies can address the most difficult international monetary transmissions currently experienced by the poorest economic agents in the traditional network. Foreign remittances amount to over 600 Billion US dollars per year, where immigrant workers send funds back to their home countries, with which they support their families and sometimes entire communities. The users of remittance services are typically individuals who do not have access to traditional banking services, accounts, credit streams and are working primarily for fiat cash. The market consists of many traditional remittance service providers who charge 10% or more (equivalent to more than 70 Billion US dollars) from the poorest individuals in society, who use their funds to provide healthcare, sanitation and education. Here, blockchain innovation may transfer wealth back into the hands of those individuals by providing a more cost effective method to rapidly send funds home. This can drastically improve the lives of billions of people around the world and promote further economic development and well-being in their respective communities.

Remittance Transmission Lag

Traditional remittance transmission take between 2 to 3 working days before a the receiving party can use the funds. This is due to the need of remittance companies such as Western Union to use complex layers of intermediaries and inter-connected banking partners (all of which require a fee) to process the transmission. Here, foreign exchange rates may also play a role in determining the time at which funds can be realised at the destination. This time delay ultimately puts unnecessary pressure on those individuals awaiting financial assistance, as most of the time remittance recipients are individuals living a hand to mouth existence. Naturally in the event of an emergency, time sensitivity is even more crucial. 

Cost of Traditional Remittance

The cost of traditional remittance is not purely a matter of the fee charged to individuals performing monetary transmissions. The economic view is to explore the effects of time, energy,  financial costs of the removal of potential capital from families who already are financially distressed. Statistically removing a fraction of the earning of those on low incomes drastically affects the ability of families to improve their well-being, health and ultimately their lives. Depression and suicide is strongly connected to the economic conditions of such families. Unlike traditional banking services, which have improved significantly over the last years, remittance markets still carry a significant burden on societies’ unbanked or underbanked. 

Blockchain Remittance

Cryptocurrencies have challenged traditional remittance service providers as they have shown great promise to enable cross-border value transmission, with a fraction of the cost and time normally experienced. Great examples of new blockchain remittance providers have emerged which use the cryptocurrency framework, without the end client even being aware that such a network is being engaged. The continual adoption of alternative remittance services shines a bright hope for those individuals facing financial exclusion. However, not all problems have been resolved by cryptocurrencies. One such remaining example is the price volatility of the token itself with respect to both the donors currency denomination and that of the receiving party. Here foreign exchange rate fluctuation may eat into the potential monetary value during transmission, damaging the financial capacity of the end client. 

SDR For Remittances

Using the SDR as a multi-currency transmission vehicle, blockchain remittance providers can secure their foreign exchange risk by connecting both the sending and receiving subsidiaries to accept a international unit of account.  In addition, SDR can be used as the fundamental remittance rail between countries, while associated governments can themselves use SDR to balance their national currency reserves, allowing citizens to freely utilise SDR as a proxy local currency. If this could be achieved, foreign workers remitting funds can place them directly into financing education, health care and sanitation in their respective communities. 

SDR Social Impact from Remittance

The SDR using a blockchain backbone can drastically improve remittance times, reducing costs for the participating individuals and improve the efficiencies of wealth transfer between countries without the foreign exchange risks normally associated with stablecoin transmissions. The social impact (both economically and physically) this can have to empower those less fortunate is significant in improving the health, knowledge and wealth fare of third world citizens.