For migrants in search of the proverbial “American dream” in a new land, finding ways to send money back home can be a nightmare.
That’s especially true of undocumented immigrants, who face additional legal and financial barriers to send their remittances. But for the tech savvy among them, a surprising savior is emerging: Bitcoin.
Cryptocurrency analysis firm Arcane Research today published the results of its latest study on the current state of Bitcoin peer-to-peer markets. The firm found that cryptocurrencies are helping immigrants, since these digital assets enable international, tax-free, cheap and quick money transfers, and without any of the red tape that’s ordinarily involved in the half-trillion dollar remittance market.
What’s more, the report found that undocumented immigrants, in particular, are increasingly turning to peer-to-peer markets to buy Bitcoin and send money back home. According to Arcane, gift cards are the preferred payment method on these types of exchanges, since they circumvent banking limitations and KYC requirements.
“The gift card trade helps undocumented immigrants to transfer value to friends and family back home,” reads the report. This method of payment is popular in North America and is, according to Arcane Research, one of the reasons behind the expansion of Paxful, an up-and-coming P2P Bitcoin exchange, in the region.
According to Useful Tulips, a metrics site that tracks the industry, Paxful has up to four times the trading volume of leading P2P exchange LocalBitcoins in North America.
The State of Crypto – The P2P Market
All data is provided by our friends at Digital Assets Data.
— Arcane Research (@ArcaneResearch) October 19, 2020
Useful Tulip’s Matt Ahlborg explained to Arcane Research how immigrants use gift cards to send Bitcoin remittances to their relatives abroad:
“Immigrants in Western countries transfer value abroad via gift cards on Paxful. The gift cards are purchased by the immigrant at a local store,” said Ahlborg. “This gift card is then photographed, and the photo gets sent to friends and family abroad. They later sell those gift cards on Paxful for BTC. Then, they convert the BTC to local currency by selling the BTC to a buyer in the local market via one of the P2P-platforms,” he said.
And while the process may seem cumbersome, the truth is that it’s faster and cheaper than traditional options. Bitcoin becomes an even more viable alternative for remittances when the political or economic circumstances are more dire. A clear example is Venezuela, where nearly all remittance services are blocked from operating in the country due to the US government’s sanctions.
“[In Venezuela], Paypal, Western Union, MoneyGram don’t work,” said Ariana Entralgo, a Venezuelan living in Argentina. “I used to send money informally through one of those businesses promoted on Instagram. You send a deposit here to a person, they confirm, call Venezuela and order a transfer to a provided bank account,” she told Decrypt.
Now, Entralgo uses Bitcoin instead, she said.
“What I do now is I buy Bitcoins here through LocalBitcoins, and once they are on my account I simply switch tabs to Venezuela and sell the BTC asking the buyer to deposit to my dad’s account. If traders are fast everything takes 30 minutes; if traders are slow it can take about two hours max.”
Entralgo explained that this method has another advantage: “You don’t have to pay huge commissions, and it’s better for you because, most of the time, the Bitcoin rates in Venezuela are very attractive.”
Arcane Research reported that 43% of all Bitcoin trading in Latin America happens in Venezuela, and although it doesn’t specify the role of remittances in this regard, it’s not very difficult to connect the dots.
Venezuela is currently undergoing a migration crisis. More than 4 million Venezuelans fled the country in 2019, according to the Brookings Institute, with many heading to neighboring Colombia. And with almost no major remittance service available, Bitcoin could be a light at the end of the tunnel for Venezuelans living abroad who need to send money home.
And it appears that the government of Nicolas Maduro, which has long looked to cryptocurrency for potential solutions to its economic troubles, is seeing the light as well: Earlier this year, it launched an official, state-run Bitcoin remittance service.