Crypto and remittances: a match made in heaven?
Crypto and remittances: a match made in heaven?
An often forgotten pillar of the global economy, the remittance market is being transformed by blockchain technology.
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A short introduction to remittances
Remittances refer to the non-commercial transfer of money from one country to another. In the vast majority of cases, remittances refer to migrant workers/diaspora communities sending money to loved ones back home. Recipients use that money for all facets of their daily spending, from buying a new motorcycle to paying medical bills.
Remittance flows are divided into so-called ‘corridors’, highlighting the most prevalent ‘sender-recipient’ relationships. Some of the most common corridors include US/Mexico, UAE/India-Pakistan-Bangladesh, and Russia/former USSR-states. All of these major corridors follow a similar pattern, whereby the sender country hosts a considerable number of temporary migrant workers or immigrants from the recipient country.
Remittances are often touted as the ‘hidden engine of globalization’, providing a number of countries with a recurrent, much-needed flow of disposable cash. Contrary to foreign aid, remittances are received by individuals rather than governments, making their impact more immediate and quantifiable. Furthermore, the numbers are unequivocal: global remittance flows reached $589B in 2021, surpassing the sum of foreign direct investment (FDI) and overseas development assistance (ODA). Notably, remittance flows are often ‘counter-cyclical’, meaning they increase instead of decrease during periods of crisis. For example, global remittance flows proved to be surprisingly resilient during the Covid-19 pandemic.