How can cryptocurrency improve cross-border payments?

One current use case for cryptocurrencies is cross-border payments. Digital assets can move money across the world faster and cheaper than traditional methods

Bitcoin can be viewed as an uncensorable form of money that can be sent by anyone to anywhere in the world. It can be sent much cheaper and more quickly than traditional methods, thereby improving cross-border payments and bypassing third parties. Bitcoin isn’t the only cryptocurrency capable of this feat either.

The current predicament

In an increasingly globally-connected world, sending money from one person to another, from one bank to another, and from one country to another has proved difficult. Large fees can be applied and the process can take days to clear.

There are a few reasons for this. Firstly, the movement of money can be contentious. Anti-money laundering laws are in place so that criminals are not able to hide their ill-gotten funds from governments wanting their tax money. This is undercut however through the use of tax havens such as the Cayman Islands. The release of the Panama Papers showed how ineffective these anti-money laundering rules can be.

Companies such as Western Union or PayPal base their business model off the fees collected for transferring money, so it is never going to be as cheap as one would like. New companies though are beginning to make a dent in this market. This is in part due to the influence cryptocurrencies have had, as they highlight how money can be moved anywhere cheaply and quickly.

How does Bitcoin solve this problem?

Bitcoin is independent of any state or third party. Should an American wish to send Bitcoin to a country with strict sanctions such as Iran, there is relatively little that the US government could do about it. They can not control Bitcoin or how people use it.

The other important factor for Bitcoin is that the fees when compared to traditional methods are extremely cheap. This again is due to the lack of a third party. There is no profit motive behind Bitcoin – the money is used on a fair basis.

Critics of Bitcoin, particularly those in the Bitcoin Cash camp, will argue that the fees for Bitcoin have already become too high as it has failed to scale. They go on to state that Bitcoin Cash provides the benefits of cheap international money transfers thanks to its larger block scaling solution.

What about Ripple?

XRP, or Ripple, is another cryptocurrency that can be used as a cross-border payments solution. XRP is a hotly-debated cryptocurrency, with some arguing that it isn’t a cryptocurrency at all.

The current international financial system runs on the SWIFT network and has done so since the 1970s. The Society for Worldwide Interbank Financial Telecommunication is what Ripple hopes to replace with its protocol.

Ripple claims its platform is quicker and cheaper and still has all the benefits of a cryptocurrency. Whether these claims are true is a debate that will continue to run on. Ripple also claims that many banks have begun to test its technology, but despite being around for many years now, we have seen relatively few real-world use cases.

The criticism Ripple receives is largely due to the different philosophies between the Ripple and Bitcoin camps. Bitcoin aims to overthrow the current financial system and Ripple wants to incrementally improve it.

What is not in doubt is that both cryptocurrencies are both quicker and cheaper than the traditional system of cross-border payments.

Will we see new regulations?

Traditionally, financial institutions have been reluctant to change. The arrival of Bitcoin, despite plenty of discussion on forums, came out of the blue for many in the traditional finance sector. The same can also be said for governments and their regulators. Therefore, many countries have been extremely slow to adapt and regulate this new industry in a productive manner.

Although transactions through the Bitcoin blockchain have become easier to trace thanks to advances in technology, this is being combated by Bitcoin developers who hope to improve the privacy of Bitcoin through upgrades such as Schnorr Signatures.

Whether this will make money laundering easier in an ever-increasing global economy remains to be seen. However, if you are looking to send money overseas, then cryptocurrencies are now a clear alternative that many argue perform better than the traditional system.


Many cryptocurrencies have lofty goals of changing the world, from helping to serve the unbanked to removing the effects of fiat money from the world economy. Cross-border payments are a clear example of the benefits that cryptocurrencies can provide. As development continues, cryptocurrency should only become an easier and much better solution for sending money overseas.



Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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