According to the reports from the World Bank, India recorded the largest remittance amount of $80 billion within this year alone. This $80 billion attracted $4 billion in fees for payment service providers. What does this mean for cryptocurrencies? For starters, there are too many intermediaries when it comes to typical global remittance. For instance, a person who wants to send money from the New York, United States to New Delhi, India will not just send it directly. While it would seem like the money traveled in a straight line, it normally passes through different payment corridors.
First of all, the money will get to a local bank in London and after a payment confirmation is received (normally days later), the money goes to Dubai where there is another partner bank. Few days after, the money gets confirmed and the receiver gets credited. At each corridor, a considerable amount is deducted as fees. This is why these typical payment models are expensive. These corridors often get about 10% of the entire the amount being sent.
How Cryptocurrency Remittance Can Benefit India
Blockchain technology eliminates the need for intermediaries. If there is no need for several payment corridors, there will be less fee. Thanks to the pace at which the digital economy is growing, the entire payment industry will soon be revolutionized. Money will be sent from one country to another as fast as emails are sent. There will be no need to pay outrageous sums as commission. Fees will fall from as high as 10% to as low as 1%.
If the country were to embrace cryptocurrencies and blockchain, senders and receivers of money will benefit more. However, the regulators in India aren’t exactly interested in cryptocurrencies and blockchain technology. A while ago, the Reserve Bank of India issued an order for all banks to end any relationship they may have with cryptocurrency-related companies. This decision affected the growth of many startups in the country.
Notwithstanding, Indian banks are currently patterning with blockchain initiates globally to create cheap remittance solutions. For this, they would need to use cryptocurrency settlements. Keep in mind that this may not eliminate the number of intermediaries but it can certainly make the payment process faster and more effective. Unfortunately, there is no legal framework for the industry and this keeps residents from exploring cheaper remittance model.
Exploring Other Options
If India decides to explore blockchain-based interbank networks that operate with a central token, this would be beneficial for remittance. For this to work, all banks must be on the same page. A single protocol to govern all banks will be necessary.
Bitcoin (BTC) Price Today – BTC / USD
For now, remittance users can continue to use cryptocurrencies to make payments irrespective of the ban placed on banks. So far, many freelancers in India accept BTC and other similar cryptocurrencies. They subsequently exchange these Bitcoins for Rupees on peer-to-peer exchanges.
The Indian government set up a panel to recommend cryptocurrency measures that can be used for creating a new regulatory framework for cryptocurrencies in India. While the result of panel discussion hasn’t been revealed yet, it may either be for or against cryptocurrencies.