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Using Bitcoin for international money transfers
Bitcoin could one day offer a simple, safe and affordable way to send money across international borders.
In September 2015, Commonwealth Bank, Westpac, Barclays, Credit Suisse and J.P. Morgan participated in the international R3 project with Ripple Labs. The R3 project was focused on creating a distributed ledger technology that works in the same way as the ‘blockchain’ structure on which all Bitcoin transactions are based. The aim of the project was to help the banks transfer funds to one another at a lower cost.
Since then, the Australian Government has been trying to establish a framework to regulate Bitcoin and the cryptocurrency space. In the Federal Budget for 2022/2023, the government shared it would treat crypto as an investment asset that is subject to capital gains tax. Due to the fall of FTX, the Australian Government will also be looking to tighten legislation around licensing crypto exchanges to help safeguard customer funds.
But what sort of impact will Bitcoin have on global finance and will it one day represent a safe international transfer option? Let’s take a closer look.
What is Bitcoin?
Bitcoin is a digital currency that was established in 2008. Commonly referred to as the currency of the internet, it is based on a peer-to-peer network that facilitates payments. This alternative payment system removes the need for a centralised authority and instead uses a public ledger known as the ‘blockchain’. This contains all processed Bitcoin transactions and allows new transactions to be verified and a user’s wallet to calculate its spendable balance.
Just like any other currency, the value of Bitcoin is determined by supply and demand, and continues to fluctuate wildly in value. At the time of writing, 1 Bitcoin is worth roughly $43,000 Australian Dollars. But if you wind back the clock to November 2021, Bitcoin's price peaked at over $87,000 AUD. The dramatic decline is mainly due to the amount of leverage used to buy crypto assets and the rise in interest rates.
The impact of Bitcoin
In the early years, Bitcoin came in for criticism for making it possible to anonymously purchase illegal goods online. Its volatility, as demonstrated above, has also been criticised, while others have pointed to the lack of regulation as grounds for concern. It could lead to money laundering and even the financing of terrorism.
Every new technology is bound to attract its share of criticism. Despite its detractors, Bitcoin and stablecoins by international migrants from Philippines and India because it offers an affordable way to send money home to their families. Bitcoin’s benefits include protection against currency debasement and the ability to control your own money outside of the government.
Could bitcoin soon offer a safer and more effective way to transfer money around the world?
The involvement of Commonwealth Bank and Westpac in the R3 project shows that the banks are aware that Bitcoin offers plenty of potential benefits for digital commerce. “The development of the blockchain will certainly have a very interesting and potentially disruptive impact on financial services,” Westpac chief executive Brian Hartzer said at the time.
There are also hundreds of other open-source blockchain experiments underway around the world, as financial institutions search for ways to streamline and simplify payments infrastructure. With low fees on overseas transfers, fast processing of transactions and the ability to cut out the middle man, Bitcoin represents an exciting opportunity for international money transfers.
However, any transition to Bitcoin payments among banks and other established financial institutions is likely to be a slow one. Not only is much of the technology still in development, but regulators in Australia and around the world are still catching up with the many implications of digital currencies.
In the meantime, the way we send money overseas will remain the same. While there is the option of sending a telegraphic transfer via your bank, specialist online money transfer companies still offer a cost-effective solution. It offers better exchange rates and charges minimal transaction fees compared to the banks, so it's definitely worth considering when you need to transfer money abroad.
Compare international money transfer providers
Our table below lets you compare services you can use to send money abroad. Compare fees, exchange rates and discounts from different money transfer services, and when you have made your choice, click Go to site.
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