A recent blog post by cryptocurrency exchange Coinbase noted that the vast majority of U.S.-based international money transfer fees do not apply to similar transactions using cryptocurrencies.
According to the exchange’s research, “the U.S. average fee rate is 6.18%, which means that the average American may spend close to $12 billion a year in remittance fees.” The post goes on to note that the average transaction time for such remittances is 1 to 10 days, while similar cryptocurrency transactions typically take around 10 minutes. Remittance payments are a "double whammy" for international transactions because, typically, they require remittance fees and conversion fees to convert between currencies.
However, the cost of cryptocurrency transactions tends to be much lower. According to Coinbase, Bitcoin Transaction fees average around $1.50 and Ether Average $0.75. Such fees can be much lower than traditional remittance fees, which average 6.3 percent, according to the World Bank. According to Coinbase estimates, sending money via BTC and ETH is 96.7% cheaper than traditional remittance methods. While the report does not appear to have the rigor of a scientific study, it does shed light on some of the difficulties faced by the more than 1 billion people who rely on remittances, and how the global adoption of cryptocurrencies will change the financial landscape. For example, U.S. remitters will account for 94.9 percent of all remittances to Mexico in 2022, according to the Wilson Center, a Washington, D.C.-based research organization.
About 6% of U.S. adults are estimated to currently hold some form of cryptocurrency, and adoption has been on the rise since at least 2019 barring a two-quarter slump in late 2022. If these ratios can increase or remain the status quo, the massive exodus from traditional remittances to cryptocurrency-based international transactions could eventually disrupt the way the global financial industry handles the associated fees.
