Stablecoins for Digital Remittances and Borderless Jobs

Stablecoins are renowned for revolutionizing the speed and cost of payments, but not everyone is aware of the human impact. Modernizing the world’s payment systems affects real livelihoods, saving families time and money and empowering them to take control of their futures.

This article will explore the more humanistic aspects to transforming the global financial system, like financial inlusion for the unbanked, digital remittances, and borderless employment. We will assess both the progress made toward this transformation as well as the obstacles left in our path.

What does it mean to be unbanked?

Approximately 1.4 billion people worldwide are unbanked. Being "unbanked" refers to a situation in which an individual does not have an account at a financial institution like a bank or credit union.

Why might you be at a disadvantage if you do not have access a financial institution?

Unbanked individuals typically do not have access to traditional banking services such as savings or checking accounts, credit, loans, or other financial products and services offered by formal institutions. This status can limit their ability to save securely, earn interest, transfer money, receive payments, get credit, or even to conduct basic financial transactions in a secure and transparent environment.

Being unbanked has several implications:

• Financial Security: Without a bank account, people often resort to less secure means of saving, such as keeping cash at home, which makes them vulnerable to theft and loss.

• Transaction Costs: Unbanked people often rely on non-traditional methods for financial transactions, like using money orders or check-cashing services, which usually have even higher fees than traditional banking services.

• Inclusion and Empowerment: Being unbanked often means missing out on opportunities for economic advancement, making it harder to escape poverty or invest in opportunities that require formal financial transactions.

• Efficiency and Time: Using informal methods to manage money or make transactions can be time-consuming and inefficient. Imagine traveling a long distance to pay bills in cash or standing in a 3-hour line at a money transfer service. This is a lot more common than you may think.

• Access to Credit: Lack of a formal financial history can make it difficult to access credit and loans, hindering the ability to invest in more expensive things like education, health, or small businesses.

• Global Economy: On a larger scale, high rates of unbanked individuals in a country can signify a less developed financial sector, which may keep foreign economic institutions from investing.

How do we solve the banking access problem?

Efforts are being made globally to improve financial inclusion, especially in developing countries, where the majority of unbanked people reside. These efforts include expanding access to digital financial services, introducing mobile banking, and creating easier identification mechanisms to open bank accounts. But these efforts will not turn the tide on their own.

To radically transform the world’s access to banking, we need a radical solution. The slow, expensive infrastructure of traditional banking systems is a strong disincentive for unbanked people weighing the pros and cons of opening an account. Overdraft fees and penalties for low account balances are especially harmful for people in developing countries. And people who send money across international borders (e.g. migrant workers) have to contend with devastating wire fees from traditional banks. Even if they do have the option to join a bank, it is no wonder so many people opt out. The unbanked workers of the world deserve better.

In addressing the banking access issue, stablecoins emerge as a potential game-changer. These digital currencies, pegged to stable assets like the US dollar, present a cost-effective and straightforward solution. Unlike traditional banking systems, stablecoins minimize the fees and bureaucratic hurdles, offering a seamless avenue for transactions and cross-border remittances. This is particularly beneficial for migrant workers who can send money home without incurring hefty fees or facing long processing times.

Moreover, stablecoins provide an entry point to financial services for the unbanked, without the need for a conventional bank account. This feature is empowering as it opens up opportunities for financial security and participation in the global economy. By integrating stablecoins into the financial framework, we inch closer to a more inclusive and equitable financial ecosystem, addressing the core challenges faced by the unbanked populations globally.

Remittances defined

Remittances are financial transfers made by individuals—often migrants—to recipients, usually friends or family members, in another location, generally across international borders.

These transfers can be made through various methods, including wire transfers, electronic payments, or using services specialized in facilitating remittances. Remittances can also be in the form of goods or in-kind transfers, but they are most commonly understood as financial transfers.

Why are remittances so vital to the global economy?

• Support for Recipients: Remittances are often a crucial source of income for recipients and can cover essential needs like food, housing, education, and healthcare. In countries with high inflation and/or unemployment, remittances can often be the only viable source of income for many families.

• Economic Impact: In some countries, worker remittances make up a significant portion of the Gross Domestic Product (GDP). For instance, in Mexico remittances account for an astounding 4.2% of GDP. They can be more stable and reliable than other types of capital flows, like foreign direct investment or foreign aid.

• Financial Inclusion: Remittance services can sometimes serve as an entry point to formal financial systems for unbanked or underbanked populations. Since they are already so intertwined, it only makes sense to address the unbanked and remittances problems at the same time, like Mural aims to do.

• Multiplier Effect: Remittances can have a multiplier effect in local economies as recipients spend the funds on goods and services, thereby creating additional economic activity.

• Macroeconomic Stability: Some countries that receive a high volume of remittances need that influx of foreign currency to stabilize their economies. For example, Argentine citizens are currently stockpiling USD to protect themselves from inflation, but those dollars have to enter the country somehow. Remittance payments are one of the most tried-and-true ways.

But there are serious issues with remittance payments.

• High Fees: Traditional remittance services often charge high fees, which can take a significant chunk out of the funds being sent.

• Access Issues: Both senders and recipients need to have access to a remittance service, which can be a challenge in remote or less developed areas. Those same 1.7 billion people we talked about in the unbanked section face significant challenges when it comes to remittances.

• Currency Exchange: Remittances often involve currency conversion, which can come with additional costs and risks related to fluctuating exchange rates. This is the gateway at which most banks and money transfer services charge their highest fees, which can be rather nasty, and often leave both senders and recipients trapped in a cycle of poverty.

• Regulatory Barriers: International remittances are subject to various forms of regulation, including anti-money laundering (AML) and combating the financing of terrorism (CFT) laws, which can complicate the transfer process.

Stablecoins Solve the Major Problems with Remittances

Stablecoin technology has the potential to address several challenges associated with remittances, making transfers faster, cheaper, and more transparent.

Reduced Costs

• Low Transaction Fees: They can dramatically reduce the fees of traditional payment platforms by eliminating the need for intermediaries like banks and money transfer agents.

• No Currency Exchange Fees: If both parties agree to use the same type, for example USDC, the need for currency exchange—and the associated costs—can be eliminated. And even if one or both parties want to use fiat currencies, the exchange still tends to be a lot cheaper with stablecoins than on traditional payment platforms that charge “juice.”

Speed

• Immediate Settlements: Traditional bank transfers can take several days to process, particularly for international remittances. On the other hand, transactions occur in real time, even for cross-border transfers.

• 24/7 Availability: Unlike traditional banking systems, which have operating hours and holidays, these networks operate around the clock, allowing for transfers at any time. Remittance payments are often urgent, time-sensitive events, because they affect people’s livelihoods. Receiving a payment even one day sooner can be life-altering.

Security and Transparency

• Immutable Records: The technology ensures that once a transaction is recorded, it cannot be altered or deleted, adding a layer of security and transparency that can have an incredible impact on people who live in places with high rates of theft and loss.

• Identity Protection: Through cryptographic methods, you can secure the identity of all participants.

Distributed

• Peer-to-Peer Transfers: Stablecoins enable direct transfers between individuals, making the process considerably more secure in places with bad-faith government interference, as well as more efficient overall.

Imagine a Borderless Distribution of Labor…

At Mural, we envision a world where work is not restricted by geographical boundaries, and people can contribute their skills to projects and companies anywhere in the globe, regardless of where they are physically located.

What it Might Look Like

• Global Talent Pool: Companies would have access to a global talent pool and could hire the best person for the job regardless of their location. This would be especially beneficial for roles that require specialized skills.

• Remote Work as the Norm: Remote work would be the backbone of a borderless workforce. People could work from anywhere, from a cafe in Paris to a beach in Australia.

• Currency and Payment: Stablecoin-based digital currencies would become the standard for employee payments, making the fees and difficulties associated with currency exchange obsolete.

• Regulatory Uniformity: There would be some form of global understanding or agreements on labor laws, taxation, and benefits to make this system manageable from a regulatory standpoint. The security and transparency of stablecoins make this future possible.

• Cultural Integration: With a diversified workforce, companies would need to adopt more inclusive practices to account for the wide range of backgrounds and viewpoints in their network. Ideally, this would help make humanity more tolerant on the whole.

This world of borderless jobs would be a radical reshaping of how we think about work, labor markets, and economic activity. While it offers the potential for greater efficiency, innovation, and quality of life, achieving this vision requires overcoming substantial logistical, cultural, and economic hurdles. Adopting stablecoin payments is the first step.

Conclusion

The world’s financial system is is need of an update. Mural uses stablecoin technology to enable a more affordable and inclusive future for the world’s workforce. If you want to help bring about the future we outlined here, schedule a demo to see what Mural can do for your business.

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