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Cross border money transfers: Crypto vs Wise

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As an Australian living overseas in Europe, I've often had cause to send money back and forth between the countries where I currently live and where I used to live. In the early 2000's when we first moved here, the options for sending money across borders were incredibly limited. Basically, you had to do it via your bank and they gouged you for the privilege with terrible rates and high fees.

Unless you were transferring stupendous amounts of money at "special" OTC rates or had direct access to the Foreign Exchange (FX) markets you were out luck and out of options.

Fast forward two decades, and we now have two competing systems that both put the international cross-border bank transfer to shame. The first is cryptocurrency, and the other is fintech options such as Wise (previously known as Transferwise). Over the years, I've used both options and whilst Wise was definitely the better option several years ago, there has been lots of structural developments that make cryptocurrencies a possible contender again.

So, let us take a quick look at how things stand at the moment!

Cryptocurrencies

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One of the original use cases for Bitcoin has been to facilitate cheap and fast cross-border transfers that would do a run around the high-fee banking system. For Bitcoin, that is no longer the apparent use case due to the relative slowness of the network in comparison to volatility and the unpredictable transaction fees due to the network usage. These days, other cryptocurrencies have stepped up to try and tackle this problem with their own unique solutions.

In previous years, the biggest problems with cross-border transfers of cryptocurrencies was volatility and fees at the fiat-crypto interface. These days, there are many exchanges such as Binance, Crypto.com and Coinbase that hook seamlessly into the traditional banking system with zero or very low fees for withdrawals to fiat accounts. Of course, those exchanges need to comply with Anti-Money Laundering (AML) laws and so to take advantage of these fiat withdrawals, you will need to have a fully identified KYC'd account.

Volatility is still a bit of a headache and a risk if you are transferring on-chain, as it will be a nervous wait whilst the on-chain transactions are confirming. It is best to choose a fast finality network to reduce the risk.... but those networks also have lower liquidity and market cap than Bitcoin, and will be subject to larger swings in price as well!

There are now better solutions to using purely crypto tokens and coins, in that there are stablecoins such as USDT and BUSD that have a presence on low-fee, fast finality networks that will keep their dollar-peg during the transactions. These are gaining adoption by most major crypto exchanges on the faster networks versions as well, so there is some hope in that direction!

So, when transferring via cryptocurrencies... ironically, current the best option is to have fully KYC'd accounts at both ends, and then do an off-chain transfer between the two accounts denominated in stablecoins! Echos of the banking system there...

Otherwise, between exchanges, there will be on-chain fees and transaction times during which volatility can take its toll if you transact in pure cryptocurrencies. However, there are on-chain stablecoins, but not all exchanges will transact with the fast finality/low fee versions.

Wise

FinTechs such as Wise has been my go-to option for transferring cross-border in the past. Wise matches buyers and sellers going in opposite directions for the currency exchange, which means that they can provide both sides with something that is pretty much the going exchange rate on the FX markets. They do make a small percentage fee on the transfer, but in comparison to the direct banking methods, it is pretty small.

It does require that the accounts are fully KYC'd again, due to the regulations surrounding money transfers. However, you can set up your Wise account with your own individual bank accounts on both ends, which makes things much easier than trying to juggle two different crypto exchange accounts on either end.

The weakness of Wise in comparison to the cryptocurrency route is the longer transit time for the transaction. There is time required for the matching, but generally for the more common pairs of fiat, it is generally less than 3 days. In practice, I have found it to be 1 or 2 days between Australian Dollars and the Euro.

Conclusion

I'm afraid that for the amounts that I'm transacting between two first-world banking systems, Wise is still the better option. However, that said, cryptocurrency cross-border transfers are catching up fast with better off-ramps for customers and faster and less volatile options as well.

Speed is where cryptocurrency will win hands down against Wise. When using Binance, I generally have the funds at the other banking end within the hour, however, I know that has much to do with dealing with banks in developed nations.

Fees are also going to be a big consideration. For smaller amounts (like mine), Wise is the better option in comparison to on-chain crypto transfers, however, if you are transacting between accounts of the same exchange (off-chain) then that could definitely be the better option depending on what sort of off-ramp fees are charged. Of course, if you are dealing with stupidly huge amounts of money, then crypto is definitely the best way as the proportional fees on Wise will get larger in comparsion to the fixed on-chain network fees.

Wrapping up, for my use case, Wise is still the best option. Check out what works best for your own use case at the moment, but it is heartening to know that the crypto option is starting to become a real challenger to the existing fintechs, and definitely stomps all over the regular bank-to-bank transfers.

Handy Crypto Tools

Ledger Nano S/X: Keep your crypto safe and offline with the leading hardware wallet provider. Not your keys, not your crypto!
Binance: My first choice of centralised exchange, featuring a wide variety of crypto and savings products.
Kucoin: My second choice in exchanges, many tokens listed here that you can't get on Binance!
Coinbase: If you need a regulated and safe environment to trade, this is the first exchange for most newcomers! Crypto.com: Mixed feelings, but they have the BEST looking VISA debit card in existence! Seriously, it is beautiful! CoinList: Access to early investor and crowdsale of vetted and reserached projects. Cointracking: Automated or manual tracking of crypto for accounting and taxation reports.

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