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Should I: Use cryptocurrencies for money transfer?

by Apoorv Trivedi on
Should I Featured Image

The Bottom Line

We think as of today, there are very few cases where a crypto transfer will be cheaper or more convenient than using a money transfer app.

It may work for a low value to transfer to a remote destination or when you already have crypto and the transfer is meant for someone who is crypto savvy.

Most people, in most cases, will be better off using a money transfer app. We recommend Wise for low cost, fast transfers and transparent disclosures.

Cryptocurrencies for money transfer?

Fans of cryptocurrencies (crypto) often hold out international remittances or money transfers as a potential use case for crypto.

Sam Bankman-Fried (SBF) recently wrote a twitter thread on this topic and highlighted money transfers as his first potential use case for crypto. SBF is the CEO of, one of the largest crypto exchanges globally and is one of the most respected names in the crypto space.

In his examples, people often lose as much as 10% of the transfer value and it can take a week for the money to reach the recipient. Instead, he sent 50 USDC via the Solana network and it reached the recipient nearly instantly for a fee of about $0.0002, basically for free.

So should you also start sending your remittances using crypto?

Not so fast.

SBF’s example only works if you already have some form of crypto and your recipient wants to hold the money as crypto.

But most people earn in the local fiat currency (SGD for us) and most recipients want funds in their local currency to spend (AUD for college fee or Rupiah for the family back home).

So to take advantage of the low crypto transfer fee, you must first convert your local currency to crypto and then at the other end convert the crypto back to that local currency.

Those transactions take time and have associated fees that are much higher than the actual crypto transfer.

A like for like comparison of crypto vs. money transfer services needs to take all these into account.

Buying crypto

Lets say you want to buy crypto in Singapore, at one of our recommended exchanges, FTX (cheapest) or Gemini (most convenient).

Gemini allows you to transfer in SGD via FAST transfer and buy crypto using SGD. However they charge a spread of 0.20-0.40% on the purchase, depending on the order type. Lets say you pay an average of 0.30%. The FAST transfer means this step usually won’t take more than a few minutes.

FTX does not accept SGD, so you must first convert SGD to USD. You can do this via your bank, in which case it will cost 0.40-1%+ and then send this USD over to FTX, which may take anywhere from a few hours to a couple of days.

If you are doing a larger transfer, it may make sense to use Interactive Brokers for the FX conversion, in which case this will cost only 0.02% or so. But that transaction could take as long at 3 days.

Thankfully, it is cheaper to buy crypto on FTX, only 0.02-0.07%, lets say 0.05% on average. So your all-in cost of buying crypto with SGD is 0.45% on FTX.

Yes, the potential cost and delays in this leg are a part of the problem SBF is highlighting with the current financial system, but crypto doesn’t really offer a solution to this problem today. If you want to buy crypto, you need to jump through these hoops.

Sending crypto

This is the fast and cheap leg of the remittance. Unless you are using the Ethereum blockchain, the cost of this leg is likely minimal.

If you use a blockchain like Solana, where the transaction may be instantaneous and nearly free. If you use Bitcoin, the transaction may take a few minutes and have small cost – usually 0 on FTX and ~US$2 on Gemini.

Of course, depending on the amount you are transferring, that $2 could be a significant cost.

Receiving crypto

Once the transfer is done on the blockchain, the recipient must withdraw the money in local currency. Whether they can do this and how much they need to pay for this depends on where they are.

As a first step, they need to sell the crypto. Depending on the exchange they use, this maybe anywhere from 0.02% to 1%+. They will probably receive USD after selling the crypto or if they receive local currency, they may pay a higher spread for that transaction.

If they received USD, they need to withdraw that to their bank account (which may charge an inward remittance fee, this is often S$5-10 in Singapore) and convert it into local currency for spending and pay a spread for that conversion.

If they are in China (or some other countries), they may struggle to withdraw funds to their bank since cryptocurrencies are banned in China. Selling the crypto on a P2P exchange or the black market for cash is likely to be complicated, expensive and slow.

In many other countries, it may be possible to withdraw the funds to a bank account but still a fair bit of hassle, as not all banks may work well with the exchanges.

All-in cost of transfer

We put all this together for four different transaction sizes: S$100, S$1K, S$10K and S$100K.

Table 1: All-in money transfer cost – Gemini vs. Wise

Step in Money Transfer S$100 S$1,000 S$10,000 S$100,000
Convert SG$ to US$ NA NA NA NA
Buy Crypto with SG$ 0.30% 0.30% 0.30% 0.30%
Transfer via Blockchain 0.20% 0.02% 0.00% 0.00%
Sell Crypto for US$ 0.30% 0.30% 0.30% 0.30%
Convert US$ to Local FX 0.40 – 7.5% 0.40 – 2.5% 0.40 – 2.5% 0.40 – 2.5%
Total via Blockchain 1.20 – 8.30% 1.02 – 3.12% 1.00 – 3.10% 1.00 – 3.10%
Total cost on Wise 0.45 – 7.5% 0.45 – 2.5% 0.45 – 2.5% 0.45 – 2.5%
* We have assumed the most efficient option at each stage. Actual cost is likely to be higher.

Table 2: All-in money transfer cost – FTX vs. Wise

Step in Money Transfer S$100 S$1,000 S$10,000 S$100,000
Convert SG$ to US$ 0.40% 0.40% 0.15% 0.03%
Buy Crypto with US$ 0.05% 0.05% 0.05% 0.05%
Transfer via Blockchain 0.00% 0.00% 0.00% 0.00%
Sell Crypto for US$ 0.05% 0.05% 0.05% 0.05%
Convert US$ to Local FX 0.40 – 7.50% 0.40 – 2.50% 0.40 – 2.50% 0.40 – 2.50%
Total via Blockchain 0.90 – 8.00% 0.90 – 3.00% 0.65 – 2.75% 0.53 – 2.63%
Total cost on Wise 0.45 – 7.50% 0.45 – 2.50% 0.45 – 2.50% 0.45 – 2.50%
* We have assumed the most efficient option at each stage. Actual cost is likely to be higher.

We find that crypto can, in some cases, be more efficient for small value transfers (~S$100) but in most cases it is unlikely to be the better option.

Crypto transfers are cheaper as long as the recipient is able to efficiently withdraw and convert USD to local currency. If they need to pay even a $1-3 fee in this step, which they usually will, it blows up the economics of the crypto transfer.

Efficiently means the exchange rate is similar to what is available at the more competitive banks in Singapore (~0.4%) and there are no withdrawal, deposit or conversion fees.

We suspect it will actually be difficult for recipients of small transfers in most countries to do this so efficiently although we don’t have data on this at the moment.

For larger transfers, the all-in cost of a transfer via Wise, Revolut or Instarem averages to around 0.65% for S$1K transfer and falls to 0.5% for a 10K transfer. This is similar to what you can achieve with crypto if the recipient gets a very efficient withdrawal.

However a transfer using one of these money transfer apps is a lot more convenient since it takes only two steps for the sender (send SGD to the app, transfer local currency to the recipient) and the recipient already has something they can spend.

With crypto this is a long process – convert SGD to USD, send USD to exchange, buy crypto, transfer crypto, sell crypto for USD, withdraw USD and convert to local currency. So even in the few cases where a crypto transfer is actually cheaper, the savings may not be worth the effort.

Where crypto may be the better option is for transfers, especially smaller ones, to more remote destinations. The apps / Western Union can easily cost anywhere from 2-10% or even more in these cases.

Even for these destinations, we are doubtful that your recipient will be able to withdraw and convert USD or crypto at a reasonable cost. The correct option will vary by country even in this case.

The onboardingĀ  and offboarding problem

Bulk of the cost of an end to end money transfer using a blockchain is for transactions that do not involve the blockchain.

Although things are a lot better than 5 years ago, the cost of buying and cashing out cryptocurrencies using your local currencies remains quite high. The process for doing this also remains cumbersome for most people and is likely prohibitive for less tech-savvy.

While this is not a problem created by blockchains, it is not a problem that they have solved either. And that is unlikely to change in the near future.

There is another problem in using crypto for money transfers – volatility.

Most fiat currency pairs are relatively stable compared to cryptocurrencies. So if you send a certain amount in your local currency, you can be fairly confident about how much the recipient will get in their local currency. In most cases the outcome will not vary by more than 0.5-1%.

Many transfer services, such as Wise, will even guarantee the exchange rate for a few hours or a few days.

However, cryptocurrencies can be quite volatile and it is not unusual for a currency like Solana to move 10-20% quite quickly. Arguably, this problem can be avoided by using a stable coin such as USDC. But with the recent collapse of Terra stable coin, that argument may not fly for a while.

In this case you run the risk that the amount the recipient gets is very different from what you were trying to send.

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