In an interview with Bloomberg on November 30, Mexico-based crypto trading company Bitso announced plans to reduce remittance fees for money transfers across the US-Mexico border by partnering with money transfer companies. This will occur with remittance companies collecting dollars from the US and converting it to crypto using Bitso’s API, which will then be exchanged for Mexican pesos.
Bitso mentioned that they estimate helping the remittance companies transfer around 2.5% of the $40 billion total annual remittances sent between the US and Mexico.
According to Bitso’s CEO and Co-founder, the business that uses Bitso’s services can use any cryptocurrency that they want, but the best option would be the USDC stablecoin, which is a cryptocurrency pegged to the US dollar. Bitso also mentioned in the report that although they haven’t eliminated the middlemen in money remittances and transfers yet, the plan to convert dollars to crypto and exchange it for pesos would create a ‘more efficient’ money transfer.
In the words of Santiago Alvarado, Bitso’s head of product for business, ‘Seventy percent of all remittance flows are cash to cash. Unless the first mile and last mile start with a digital wallet or digital bank account, you still have to have that partner that can collect cash and allow cash pick-up on the other end. Everything else can be done within Bitso.’
Bitso’s services that will allow faster and cheaper remittances were backed by Will Madden, the Chief Executive Officer of Bridge21, a money transfer company that uses crypto for remittances from the US to Mexico. He told Bloomberg in an interview on November 30 that the amount of time it would take to transfer money with crypto can take from minutes and even seconds as opposed to days in regular remittance services.
Additionally, the payment risk expert in the Federal Reserve Bank of Atlanta, Douglas King, also mentioned in a podcast about the payment system published by the Federal Reserve Bank of Atlanta on September 27 that the use of crypto in money transfers would urge the industry to bring down the cost of remittances.
King said that the money transfer business is expensive since the companies need two agents on both ends of the border. Bitso claims to cut down the cost to a few tenths of a percentage point compared with the 2% cost in other service providers.
A similar project between money transfer and crypto was first done back in 2019 with MoneyGram, the largest money transfer service in the US, partnering with Ripple. However, the project between the two companies failed with Moneygram’s CEO Alex Holmes telling The Motley Fool in an interview conducted on November 6 that the technology behind the transfer works, but it was an early product that still had a long way to go.’
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