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Cryptocurrencies as a tool used for remittances – Article Review


Regulators in South East Asia have become increasingly hawkish on digital assets such as Bitcoin and other cryptocurrencies. On the 9th of August, Thai Finance Minister Arkhom Termpittayapaisith announced plans to put in place tougher rules on platforms and exchanges that offer trading in digital assets. This follows Singapore’s steps to expand its own regulations, marking a potential change of its previously friendly business environment. To some extent, these are merely part of the global trend towards more government scrutiny of digital asset markets after their sudden and continuing crash. However, in South East Asia in particular, regulators should tread cautiously. Over-regulation risks stifling a promising industry whose innovations could unlock prosperity for millions by making remittances easier.


Remittances are important globally, but even more so in areas where unbanked populations prosper, such as South East Asia, where latest estimates found over 70% of the population to not have a bank account. In 2021, remittance flows totalled $597 billion. A common problem for migrant families across south east Asia is the inability to access finance. As the main income earner is abroad in a foreign employment system, the family at home lacks documentation to prove to lenders that they are not a credit risk. Without finance, families can’t take out loans for life-transforming investments such as education or in the case of an emergency. However, as both the OECD and the Asian Development Bank have reported, a decentralized blockchain allows workers abroad to record their financial and labor status simply and accurately, without even needing access to an ID. These records are trusted by banks in home countries due to the security of the blockchain. Using these records, their families back at home can, for the first-time, take-out loans to make investments that lift them out of poverty, potentially with the help of what has come to be known as decentralized identifiers.


Blockchain can also make the existing remittance system faster and cheaper. Currently, intensive anti-laundering Know Your Customer (KYC) regulations are one of the chief reasons for the cost and slow speed of remittance. Of course, a certain amount of regulation is to be both expected and desirable. However, the current stance of many of our government goes too far. By regarding all cryptocurrencies companies – and more importantly, blockchain developers – with unstinting suspicion, we risk killing the entire industry with caution. While not perfect at the moment, a degree of imperfection and risk-taking is required for innovation. And, if an innovation is achieved, it could boost remittances and prosperity for the entire region.



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