DUBAI: Muhammed Bilal used to have to wait for his turn outside a money transfer agency in the sweltering heat of Dubai to send $1,000 every month to his wife and parents in Pakistan Each transfer cost him roughly $7.
He now uses an app that enables immediate money transfers with no transfer fees, joining the rising number of migrants in the United Arab Emirates who use cryptocurrencies and blockchain technologies to send money home swiftly and affordably, Ruters said.
Customer service representative Bilal, 27, said, “Now, I don’t have to stand in lines.” I use my cell phone to do it at home, and the money is sent immediately.
According to blockchain analytics company Chainalysis, the Middle East and North Africa had the world’s fastest-growing cryptocurrency market last year, with crypto transactions into the area surging by 48% to $566 billion in the year to June.
Growth in the region is being fueled by the usage of cryptocurrencies for savings and remittances as well as more tolerant policies, it was claimed. As it strives to become a centre for the cryptocurrency business, the UAE intends to make Dubai “the first city fully powered by blockchain” and has created legal and regulatory frameworks around digital assets.
Since the app’s debut in 2017, according to Pyypl CEO Antti Arponen, 5 million people have downloaded it. He told the Thomson Reuters Foundation that “eighty percent of our users are migrants and the numbers have been growing exponentially in the last few years.”
Despite a market crisis last year that saw many holders of digital currencies suffering significant losses, migrant workers said that cryptocurrency offered a better bargain than conventional banking and money transfer services.
Gerard Dingal, a 30-year-old pastry chef, uses cryptocurrency and Pyypl to send money to his mother and sister in the Philippines. “With crypto, there are almost zero fees – easy, instant and safe,” he said.
According to Pete Howson, a crypto specialist and associate professor of international development at Northumbria University in Newcastle, England, such platforms expose consumers to the danger of frauds and extremely volatile currencies. “Users’ funds aren’t insured when they use these sorts of platforms (crypto and blockchain-based apps), like they are with a bank,” he claimed.
Migrants seek value
According to a report released by the UN Capital Development Fund last year, the 9.3 million people who live in the UAE are largely immigrants, with the majority coming from Egypt, India, Pakistan, Bangladesh, and the Middle East. They send billions of dollars back home in remittances, but the majority of them are manual labourers who do not make the 5,000 dirham ($1,350) minimum monthly salary needed to open a bank account in the UAE, it claimed.
According to Mohammad Jalal Uddin Sikder, a coordinator at the Centre for Migration Studies in Bangladesh and a researcher on labour migration, migrants frequently utilise cash transfer services since they are less expensive.
“Migrants meticulously weigh each dollar. There are enormous costs associated with going to the bank and making remittances of any kind, he noted. In the United Arab Emirates, money transfer firms normally impose a fixed cost of 25 dirham each transaction. Cryptocurrencies, however, which enable “peer-to-peer” exchanges online between individuals without any middlemen like banks or financial institutions, may still offer superior value.
Migrants may buy cryptocurrency using credit cards or through cryptocurrency exchanges, then instantaneously transfer it to the digital wallets of their family. The crypto will then need to be converted into the local money by their family. Depending on the app used and the nation receiving the coins, transfer expenses might range from free to 0.5%. Additionally, there is normally a fee for currency exchange, while some firms just charge one penny.
Volatile market
Banks and other financial institutions are attempting to take advantage of technological advancements to make it simpler and less expensive for migrant workers to send remittances home as crypto services in the Gulf profit. The “Digital Dirham” currency, which the central bank of the United Arab Emirates has unveiled, would allegedly make international payments simpler and increase financial inclusion.
It and the reserve bank of India inked a contract in March to test a common infrastructure that would enable national digital currencies to be used for trade and remittances across international borders. In its 2022 annual report, the Foreign Exchange and Remittance Group, a UAE industry group for the money transfer sector, said that in response to demand, its members are expanding their availability of mobile and digital payments.
However, other immigrants who have cryptocurrency holdings claim they are seeking for less dangerous choices. After the 2022 market meltdown, Ahmed Abdel Fattah, an Egyptian immigrant living in the UAE, began to lose trust in digital assets. He had previously invested and sent remittances in cryptocurrency.
“I lost more than half of my investments,” stated driver Abdel Fattah. The market is quite volatile. Because of this, I quit making cryptocurrency investments and am considering my other choices.
According to Howson, adoption of cryptocurrencies and blockchain services will be constrained in areas where there are better, safer alternatives. Crypto is beneficial to immigrants—until it isn’t, he added. Blockchains can be helpful if you don’t trust governmental and financial institutions, but nobody wants to be held responsible for mistakes.
