Anton Titov, founder of a RemiDe, a SWIFT-type system for the crypto age, explains why Africans pay so much more than Europeans to send money – and how a solution is at hand. From Moneyweb.
You can also listen to this podcast on iono.fm here.
Your passport determines how much you pay to move money. When you send money from South Africa to Nigeria or Zimbabwe, your funds are routed through multiple intermediaries who all take a cut.
This can come to 20% or more, though the World Bank says the average for remittances is 7%. The World Bank target is to get the costs of remittances down to 3% but it has missed this target for more than a decade.
In a world where sending money across borders can incur exorbitant fees, the advent of stablecoins presents a revolutionary solution.
The problem with crypto transactions is if you send to a wrong address, the funds are gone. One wrong letter or numeral in an address is all it takes.
Crypto was designed for money to be sent peer-to-peer without an intermediary and it does this very well – provided you make no mistakes. This has discouraged people from removing their crypto assets from exchanges and placing them in hard wallets, for fear that they lose funds by mistake.
On this podcast, host Ciaran Ryan is joined by Anton Titov, serial entrepreneur and founder of a company of RemiDe, which set out to improve how money moves across the globe.
Titov explains the stark contrast in costs between transferring money within Europe (where it is almost free) compared to remittances to Africa, largely due to the interconnected banking systems in Europe, such as SEPA (Single Euro Payments Area), which allows for very low-cost transactions.
Listen/read: What if South Africa’s access to SWIFT is threatened?
The podcast further explores the role of the SWIFT payment system, which connects over 10 000 banks globally.
Titov points out that while SWIFT facilitates international transfers, it adds layers of complexity and cost due to the multiple intermediaries involved.
For instance, when sending money from the Czech Republic to South Africa, remittance fees can soar to around 9% or more. He emphasises that many of these intermediaries are also struggling to maintain profitability, further complicating the landscape for consumers.
Stablecoins as a solution
With traditional systems facing scrutiny, Titov argues that stablecoins offer a more efficient alternative for international money transfers.
The current landscape is ripe for disruption, as the use of stablecoins is projected to grow significantly, especially in emerging markets where traditional banking systems are less efficient.
He anticipates that in the near future, regulations governing stablecoins will evolve, paving the way for broader adoption and integration into mainstream finance.
Despite the potential benefits, Titov acknowledges that the transition to stablecoins is not without its challenges. Regulatory hurdles remain a barrier, with governments trying to control and monitor transactions to prevent fraud and illegal activities.
Listen/read:
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He highlights the recent introduction of regulations such as the European Mica (Markets in Crypto-Assets) framework and the Stablecoin Genius Act in the US, which aim to legitimise and regulate the use of stablecoins. This has opened the floodgates to wider usage, with several banks now issuing their own USD-backed stablecoins.
The costs of transferring money will plunge as more people adopt stablecoins.
The podcast concludes with a discussion on the future of remittances and the role stablecoins will play in reducing fees and improving efficiency.
A new era …
As more individuals and businesses recognise the advantages of stablecoins, it’s likely that we will see a shift away from traditional systems like SWIFT, leading to a more streamlined and cost-effective approach to international money transfers.
In crypto terms, we are in the pre-SWIFT era, and RemiDe is at the forefront of this change. The Travel Rule has been adopted worldwide, requiring senders and receivers of crypto assets like stablecoins to undergo Know Your Customer identification.
In future you will be identifiable on the blockchain, just as you are through your bank account, but with something as innocuous as a nickname.
That means crypto transfers that somehow get lost may be recoverable through a simple phone call or message to your bank or crypto asset service provider.
This potential to lose funds when sending to a wrong address has been a major barrier to wider adoption has been solved by RemiDe, which creates a database of financial participants – just as SWIFT currently does for the banking sector.
This fascinating podcast shows how rapidly the crypto era is advancing and, in many ways, overtaking the traditional finance market.
