Transferring money is a vital part of every business entity and individual. With the rise of digital currencies and their effectiveness as digital assets, cryptocurrencies are becoming a great option for transferring money. Needless to say, virtual currencies (cryptocurrencies) offer significant advantages for those who transfer money regularly. International payments can be made faster, more secure with the use of cryptocurrencies like Bitcoin and Ethereum. Sending money using cryptocurrencies is easier, and cheaper than fiat currencies.
However, without proper KYC verification solutions, cryptocurrencies can easily become the hub for money laundering. With more and more users pouring in, the landscape of digital currencies is changing and several cryptocurrencies are also being used as a type of investment or as a form of money transfer. Here’s how cryptocurrencies can be used for money transfers.
In the simplest terms, cryptocurrencies are a type of virtual currency that is supported by cryptography technology. By using secure algorithms and a secure network known as Blockchain, cryptocurrencies are currently one of the most secure ways to send and receive money domestically or internationally. By using cryptocurrencies, businesses can acquire the most secure method of sending money online while reducing the risks of double spending and fraudulent transactions.
Cryptocurrency’s methods can also help businesses move away from centralized banks. The whole cryptocurrency infrastructure is built on top of blockchain technology. Blockchain technology uses Proof of Stake (PoS) smart contract technology also known as Proof Work (PoS) smart mining technology to authenticate and confirm transactions. To make the process even more secure, it is posted on a public blockchain address that a global network of users can verify whenever a transaction is made.
As cryptocurrency is decentralized in nature, the crypto industry can easily transform the world of online transactions and send money anywhere throughout the globe. Crypto is also being used to sell artwork and other creative assets.
What is Stablecoin?
Stablecoin is a certain type of cryptocurrency that was specially designed to be used every day for all kinds of transactions. Stablecoin is a digital asset, equal to USDC which is said to be a reserve asset or stable asset. Stablecoin can easily be exchanged for any other currency, like Bitcoin, gold, or a fiat currency. It can also be modified by an algorithm to remain stable, unlike other volatile cryptocurrencies. Therefore, stablecoin is more suitable for day-to-day transactions because a reserve asset can support it.
Stablecoin is attempting to be a fiat coin as it is backed 1:1 by an asset held in the regulated institution. That’s the sole reason why Stablecoin is an incredibly powerful solution for international money transfers, unlike other members.
While Stablecoin and cryptocurrency aren’t yet perfect for online money transfers, they can be transferred to other users. It’s simple math, the more wallets that accept cryptocurrencies like stablecoin, the more users there will be.
Methods that Crypto Can be Used for Money Transfers
Cryptocurrencies such as Bitcoin and Ethereum are changing how money transfers are done. There is no need for any intermediary bodies to approve the transaction made between P2P, consumers (B2C), and businesses (B2B). This also means that transactions can be made with lower approval fees, fewer delays in payment processing, and more options for receiving.
Blockchain technology significantly reduces the time and cost associated with clearing transactions and settling payments. By leveraging smart contract technology, payments can be initiated and settled almost automatically, thus pushing the users further to real-time transactions which simply isn’t possible by using traditional financial institutions.
With blockchain technology, cryptocurrency companies have immediate access to the funds that are needed to be transferred. To put it in simple words, a person can make donations to a non-profit organization and that organization will receive the money on the same day.
P2P transaction services and digital wallets allow users to accomplish this as well but there are also certain restrictions as to how quickly the money can be sent to a certain bank account. To make this limitation worse, these services charge a significant fee on each money transaction, one of the biggest examples of this is “PayPal.” Not all of these digital wallets are as secure as cryptocurrency too, by using instant bank account verification software, digital wallets can reduce the risk of payment fraud. To prevent being a part of a money-laundering scheme, these digital wallets also put a limitation on how much a person can transact in a business day.
Using Blockchain for Money Transfers
Money that’s sent from a bank follows a certain set of rules and regulations. Banks allow Automated Clearing House (ACH) payments to go through them and wait for ACH Network to approve these transactions. Unless this procedure is completed perfectly, the payment will be sent back to the originator’s bank account. Time taken for an ACH transaction to complete varies from 3 business days to as much as a week.
Cryptocurrency on the other hand is extremely secure and fast because the internal network verifies the online payment, private keys, and public keys. Like most digital wallets, the crypto industry uses tokenization to enhance the structure of capital markets. Blockchain can also allow users with bad credit to get loans. By leveraging blockchain, borrowing money can be made more secure with a lower interest rate.