Migrants in UAE Turn To Crypto To Send Remittances Home
The Middle East and North Africa had the fastest-growing crypto market in the world last year, according to blockchain data platform Chainalysis, with crypto transfers into the region rising by 48% to $566 billion in the year to June.
The use of crypto for remittances and savings, as well as increasingly permissive regulations, are helping to drive growth in the region, it added. The UAE plans to make Dubai “the first city fully powered by blockchain”, and has developed laws and regulatory systems around digital assets as it pushes to become a hub for the crypto industry.
Antti Arponen, CEO of Dubai-based fintech firm Pyypl, said 5 million people had downloaded the app since its launch in 2017. “Eighty per cent of our users are migrants and the numbers have been growing exponentially in the past few years,” he told the Thomson Reuters Foundation.
Migrant workers said crypto offered a better deal than traditional banking and money transfer services, despite a crash in the market last year that left many holders of digital coins nursing heavy losses. “With crypto, there are almost zero fees – easy, instant and safe,” said Gerard Dingal, a 30-year-old pastry chef, who has been using crypto and Pyypl to send money to his mother and sister in the Philippines.
But such platforms expose users to the risk of scams and highly volatile currencies, said Pete Howson, a crypto expert and assistant professor in international development at Northumbria University, in the British city of Newcastle. “Users’ funds aren’t insured when they use these sorts of platforms (crypto and blockchain-based apps) like they are with a bank,” he said.
Nearly 90% of the UAE’s 9.3 million population are migrants, according to a report by the UN Capital Development Fund last year, many from India, Pakistan, Bangladesh, Indonesia and Egypt. They account for billions of dollars in remittances to their home countries, but most are manual workers who do not earn the 5,000 dirhams ($1,350) minimum monthly income required to open a bank account in the UAE, it said.
Migrants also often use cash transfer services because they are cheaper, said Mohammad Jalal Uddin Sikder, a researcher in labour migration and a coordinator at the Center for Migration Studies in Bangladesh.
“Migrants carefully consider every cent. Going to the bank and sending any form of remittances entails high fees,” he said. Money transfer services in the UAE typically charge a flat fee of 25 dirhams per transaction. But cryptocurrencies, which allow “peer-to-peer” transfers between users online without any intermediaries such as banks or financial authorities, can be better value still.
Migrants can buy crypto using credit cards or crypto exchange offices and then transfer it instantly to their families’ digital wallets. Their relatives will then have to convert the crypto to the local currency. Transfer costs usually range from free to 0.5% depending on the app used and the country coins are being sent to. There is also typically a charge for conversion in or out of local currencies, though some services charge as little as one cent.
As crypto services in the Gulf cash in, banks and other financial institutions are also trying to harness tech developments to make it easier and cheaper for migrant workers to send remittances home. The UAE’s central bank has announced a “Digital Dirham” currency which it says will help ease cross-border payments and improve financial inclusion.
