Fees

Digital Remittances Reach Record High of $96 Billion, Fees Charged by Traditional Providers Open Door for Cryptocurrencies

14/02/2020 by Idelto Editor

In a globalized world where labor follows capital, the remittance industry has been growing constantly in both volume and users. Traditional providers like banks and money transfer companies have been charging high fees for their services which creates opportunities for alternative digital platforms and decentralized cryptocurrencies.

Also read: Russians Can Use Qiwi, Sberbank, Yandex Money and Now Binance P2P Exchange to Buy Bitcoin With Rubles

Digital Remittance Volume Projected to Touch $143 Billion by 2023

According to numbers gathered by market data provider Statista, the total transaction value of digital remittances, cross-border transfers made over the internet, has reached almost $95.96 billion in 2020, representing a year-over-year increase of more than 21%. At the same time, the number of users in this segment of the remittance market has been estimated at 8.5 million (+20.5% yoy). Both indicators are projected to increase by 2023, to over $143 billion in volume and 13.2 million users.

Last year, the largest share of users (32%) were between 25 and 34 years old, and another 25% were aged 35-44 years, a majority from labor-active age groups. The average annual transaction value per user in the digital remittances segment amounts to a little over $11,233 according to the data released this year. Five countries, United States, Switzerland, Saudi Arabia, Germany, and China, top the transaction value comparison chart. With a total transaction value of $21.297 billion, the U.S. is the pronounced global leader and Switzerland comes in second with $7.969 billion.

Total transaction value in the digital remittances segment, Source: Statista — Global comparison, transaction value. Source: Statista

The authors of the report note that remittances often occur on a regular basis and most of the user groups are not inclined to change their fund transfer provider very often. The sector is dominated by established service providers such as banks, post offices and money transfer processors like Western Union and Moneygram. The relatively high fees they charge has opened the way for alternative platforms such as Transferwise, Worldremit and Remitly, Statista points out, which have managed to cut costs by optimizing the use of digital infrastructures.

Ripple’s Latest Remittance Service Agreements Turn the Tide for XRP

While there have been various developments around XRP recently, some of them have influenced its market in a positive way. Two partnerships have been announced this month in which Ripple, the company associated with the cryptocurrency, will be providing remittance services. The price of XRP, the third largest cryptocurrency by market capitalization, spiked over the past couple of days, from a low of $0.2678 on Feb. 11 to a high of $0.3288 early on Feb. 13. Although the crypto lost some of the gains later on Thursday, the price jump is remarkable as it comes after a difficult year for one of the top coins.

According to media reports this week, the National Bank of Egypt (NBE), the country’s largest financial institution by assets and branches, has signed a cooperation agreement with Ripple to open a new channel for receiving remittances from Egyptians that live and work abroad. The bank said it wanted to employ Ripple’s blockchain solutions to further develop its remittance business supporting transfers from around the world and particularly the Gulf region.

The Egyptian deal follows another similar agreement announced by Ripple earlier in February. The company revealed it’s going to work with International Money Express (Intermex), a leading remittance services provider focusing on Latin America and the Caribbean corridor, to address the challenges with slow and expensive cross-border payments. Intermex plans to leverage Ripplenet for faster remittances between the United States and Mexico. Ripple claims the network links over 300 banks and financial institutions globally.

According to the World Bank, Mexico ranks third among countries with the highest number of remittance recipients. Data published by Banco de México, the nation’s central bank, shows that Mexican emigrants have sent home a record $36 billion in 2019, a 7% increase over the previous year’s almost $33.7 billion. Most of the money, a large portion of which comes from the U.S., has been transferred electronically and in small transactions averaging around $300. Intermex is one of the largest money remitters between the two countries processing more than $30 million in transactions annually.

The status quo in the digital segment of the remittance market undoubtedly creates opportunities for decentralized cryptocurrencies as well. Transaction fees in the case of bitcoin cash (BCH), for example, are less than a cent per transfer. Certain regions can benefit significantly – a 2019 report by the World Bank revealed that the average cost to send the equivalent of $200 to Sub-Saharan Africa is 9.3% of the transferred value, as news.Bitcoin.com reported last year. In 2018, African expatriates sent $46 billion to their home countries.

What are your expectations about the future of the remittance industry? Share your thoughts in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Images courtesy of Shutterstock, Statista.

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UK Crypto Startups to Pay Discounted £2,000 Fee for Registration, FCA Revises Application Charges

05/02/2020 by Idelto Editor

Young and small cryptocurrency businesses will pay lower registration fees than big companies, the United Kingdom’s financial watchdog has decided after consultations with members of the industry. The revised fee scheme takes into account the firms’ income to determine the amount they’ll be charged to cover supervision costs.

Also read: Singapore Introduces Licensing for Crypto Platforms, New Payment Services Act Now in Force

Two-Tier Fee Scheme Replaces Proposed £5,000 Flat Charge

According to recently announced amendments to the registration regime, small crypto companies will pay £2,000 (around $2,600) for their applications while those with turnover from crypto-related activity exceeding £250,000 ($325,000) will face a higher fee of £10,000 ($13,000). The new two-tier system replaces the flat-rate charge of £5,000 that was proposed last year.

In October, the U.K.’s Financial Conduct Authority (FCA) issued a consultation paper with its proposals for recovering the oversight costs from the crypto sector under the country’s updated regulations transposing EU’s AMLD5. Since Jan. 10, the agency has been the anti-money laundering and counter-terrorist financing supervisor of businesses operating with digital assets. The changes were made by the FCA Board on the same date and came in force on Jan. 13. The handbook notice was published on Jan. 31.

The FCA, which is funded by the fees and levies from the firms it regulates, had estimated it would need to collect a total of £400,000 ($520,000) from 80 potential applicants for the costs of the regulatory gateway. The revision of the application fees comes after the authority received 29 consultation responses and held a meeting with crypto businesses. The authority details:

A strong message from a roundtable meeting with cryptoasset businesses on 18 October 2019, backed up by many of the written consultation responses, was that our proposed registration charge of £5,000 would be too high for small firms and startups.

The Financial Conduct Authority provides some examples from the feedback it received which influenced its decision. The chief executive of one of the companies shared that a registration fee of £5,000 would’ve been almost as much as his entity spent during the first two years of its launch. Representatives of another company noted that the initially proposed application charge equals the six-month profit from one bitcoin ATM.

Compliance Expenses Can Reach 20% of Revenues

The FCA acknowledges that some of these small businesses face losses in their early years and that a higher registration fee might push them to either cease operations or relocate to more favorable jurisdictions. The administration notes, however, that according to an earlier review conducted in 2014, direct regulatory fees represented around 3% to 4% of firms’ revenue. At the same time, indirect compliance costs were at 16% for applicants with revenue up to £250,000.

Some of the companies that provided feedback also noted that the fee proposed by the FCA was higher than a similar charge applied by the HM Revenue & Customs, Britain’s tax service, for anti-money laundering supervision. Others have expressed doubts regarding the cost of the regulatory gateway, noting that it’s unclear how the FCA came to the £400,000 figure.

Respondents also asserted that the FCA had underestimated the size of the sector that might have much more than 80 entities, given that even already registered financial services companies will be required to apply and pay the new fee if they want to conduct cryptoasset activities. To these concerns, the regulator replies with a promise to “keep these charges under review and may consult on amending them once we have greater experience of the industry and are registering new businesses only.”

The financial authority insists that late registrants won’t enjoy any advantages. “All cryptoasset businesses trading on 10 January 2020 are subject to 5MLD and are required to be registered with the FCA by 10 January 2021. We have warned that we cannot guarantee to give a decision by then if businesses apply after 30 June 2020,” Handbook Notice 73 reads. In other words, if a business files its application too late, there’s a risk that it might not be registered by Jan. 10 and would have to cease operations until its status is determined.

What’s your opinion about the U.K.’s registration process for crypto companies and the applicable fees? Share your thoughts in the comments section below.

Images courtesy of Shutterstock.

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Crypto Exchange Zebpay Announces Relaunch in India Ahead of Supreme Court Decision on RBI Ban

30/01/2020 by Idelto Editor

Zebpay is returning to India more than a year after closing down local crypto exchange operations due to the banking ban imposed by the central bank, the Reserve Bank of India (RBI). Under a new leadership team, the exchange has also revealed a number of upcoming new services, including a crypto-to-crypto exchange and a way for users to earn passive income.

Also read: Hearing Concluded — Indian Supreme Court Reserves Judgment on Crypto vs RBI Case

Zebpay Returning to India

Zebpay, formerly one of the largest cryptocurrency exchanges in India, announced on Wednesday that it will be relaunching in its home country. “Zebpay is back,” the company wrote, adding:

A new leadership team, crypto-crypto trading, no-fee trading on select pairs, an upgraded focus on security and innovation, and a passive income and borrowing program on the horizon.

The exchange’s CEO is Rahul Pagidipati, the announcement continues. “With a new CFO, CMO, and Chief Strategy Officer, we’ve got a new vision to become one of the most trusted, innovative blockchain service companies in the world.”

The company closed down its Indian exchange operation back in September 2018, a few months after the RBI’s banking ban went into effect. “The curb on bank accounts has crippled our, and our customer’s, ability to transact business meaningfully. At this point, we are unable to find a reasonable way to conduct the cryptocurrency exchange business. As a result, we are stopping our exchange activities,” Zebpay said at the time. Since leaving India, the company has set up operations overseas, such as in European countries and Australia.

New Services Announced

Noting that it has been working on a number of new services to launch in India, Zebpay detailed:

In the coming months, we will launch crypto-crypto trading, to allow you to trade pairs like ETH-BTC and stablecoins with instant buy/sell.

In addition, for a limited time, the platform will waive trading fees for one selected pair each month, for the entire month, starting with BTC-ETH.

Zebpay further revealed that it has created a new company in its group called Genie Technologies Pte. Ltd. to focus on security research. “We’ve created one of the world’s most advanced, secure wallet systems to protect your crypto assets,” the company claims. While trading fees used to cover the costs of maintaining its wallet security, the company has been paying these costs themselves since 2018. It has therefore decided that from March 1, each member will be charged a flat monthly fee of 0.0001 BTC. “If the price of bitcoin goes up significantly, we’ll adjust the fee downwards,” Zebpay promises. “This will allow us to cover the cost of wallet security until we launch crypto-crypto trading later this year … Once we resume crypto-crypto trading, you won’t be charged a wallet fee as long as you place even one trade per month.”

Supreme Court to Decide on RBI Ban

The central bank issued a circular in April 2018 banning regulated financial institutions from providing services to crypto businesses. Banks subsequently closed the accounts of crypto exchanges, causing extensive damage to the crypto industry. Besides Zebpay, a few other exchanges have also closed down due to the banking restriction, such as Koinex and Coindelta. The remaining crypto exchanges cope with the ban by launching peer-to-peer trading platforms.

The Indian supreme court has been hearing the arguments against the ban for the past two weeks from Ahsim Sood, the counsel for the Internet and Mobile Association of India (IAMAI), and Nakul Dewan, the counsel representing a number of crypto exchanges. The hearing wrapped up on Tuesday. On the same day, the court issued an order stating that the judgment has been reserved and the counsels may file written submissions by Friday.

While the central bank has insisted on placing a banking restriction on the crypto industry, it has clarified that cryptocurrency is not banned in India. Furthermore, Indian Prime Minister Narendra Modi last week presented a prestigious award to a young entrepreneur who created a cryptocurrency app.

What do you think of Zebpay relaunching in India? Do you think Zebpay will be as popular as it was? Let us know in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Images courtesy of Shutterstock and Zebpay.

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What Is the Ideal Block Size and Fee Cost?

24/01/2020 by Idelto Editor

Many of the debates around block size in Bitcoin operate under the false premise that the question can even be properly answered by a central authority. But markets are better at deciding these questions and block sizes and fee costs should be worked out by miners and users, not development committees.

Also read: How is Bitcoin Cash Different from Bitcoin Core?

Price-fixing doesn’t work

Dan Held writes in his latest Medium post:

A decentralized economy complements the dispersed nature of information spread throughout society. Each company is an attempt to take the local knowledge that it has and create a good or service that ultimately is the correct capital allocation (aka profit).

This is correct, which makes me think he must not understand the point he’s trying to make, because Held also argues that Bitcoin developers must impose production quotas on block space in order to maintain an ideal block size in Bitcoin and ensure miner profitability and network security.

Price fixing like this breaks Bitcoin for the same reason any form of price-fixing doesn’t work. It distorts the local information economic actors have that would allow them to properly allocate their own capital and energy. This often leads to an overproduction of a particular economic good and an underproduction of another, or, bloat and shortages.

In Bitcoin, the result of this central planning of block space are externalities like the mempool congestion of 2017 that effectively plunged BTC into a two-year dark age of stagnating prices and regressing merchant adoption.

It was the predictable outcome of a tiny developer committee overprioritizing ‘security’ instead of letting the whole market work out exactly how much security is really needed to protect the network while allowing fees to remain low enough for users and merchants to continue using Bitcoin as peer-to-peer electronic cash.

We Don’t Need to Know

A market can work instead to govern block sizes and transaction fees better than a committee of developers. We don’t need to know the ideal block size or the ideal transaction fees in advance, or even worry about it, because the market will tell us. All that is necessary is to remove the arbitrary limits imposed by developers and to allow all the transactors on the network and all the miners to work out the cost of fees and the “ideal” size of the blocks themselves.

This is how Bitcoin was designed, markets, not developer cartels making decisions for everyone on the network. And it is the reason Bitcoin Cash originally forked from BTC. It wasn’t simply block size as such, though they were certainly too small, it was the way block size was being centrally planned by developers instead of being decided by the real economic actors in the market.

As Hayek wrote in “The Use of Knowledge in Society”:

A centrally planned economy could never match the efficiency of the open market because what is known by a single agent is only a small fraction of the sum total of knowledge held by all members of society

It works in Bitcoin like this.

A. Miners want to make the most money off of fees possible while reducing risk and cost of doing business.

B. Users want to get the cheapest and fastest deal on block space possible.

C. Both parties know their own interests better than any developer could sitting outside of their exchange.

If blocks are too big, miners might assume unnecessary cost and risk, or cause security or syncing issues with the broader market of businesses involved in Bitcoin running their own nodes. If blocks are too small, miners limit their profitability and the potential growth of the network. If fees are too low, miners can’t make money. If fees are too high, miners won’t make much money either because users will simply stop transacting.

Somewhere in between the needs of the miner and the user, there is an answer to the ideal transaction fee and the ideal block size. Neither too big nor too small, neither too cheap nor too expensive. There may be some problems here and there, and the planner’s temptation is to try to predict those problems and stop them in advance, but this is the only way these questions can be decided if we want the network to scale globally. They cannot be decided by committees, Telegram chats, Reddit threads, Twitter arguments, or community polls, and attempts to centrally plan answers can lead to unintended consequences because they cannot possibly coordinate all of the local information independent economic actors in Bitcoin have.

In BTC, for example, we can’t know the answer because the limits imposed by Core developers prevent this discovery process from happening. Until they are removed, BTC will continue to struggle growing, because artificial limits on scaling create artificial limits on demand potential.

Leave it to the market. It knows better than us.

Sound Economics

The opportunity for an economically rational Bitcoin free from production quotas on block size, price-fixing on fees, and developer committees has never been better.

Bitcoin Cash was created in 2017 to be that fork, and decision-makers in Bitcoin Cash should remember that an economically sound roadmap is as important as a technically sound one. They should resist the temptation to over-plan the economic activity of the network lest they create the same problems that plague the BTC branch of Bitcoin. They should allow a real market for block space and fees to develop.

The fork of Bitcoin that wins mass adoption will be the one that recognizes that there is no ideal transaction fee and no ideal block size. There is only the market and economic actors in that market making rational, self-interested decisions.

This article was originally published on Breaking Satoshi.

Op-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

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Getting In and Out of the Cryptocurrency Economy Can Be Costly

24/12/2019 by Idelto Editor

Since bitcoin and digital currencies have become popular, fiat on and off-ramps have sprung up that allow investors to enter and exit the cryptoconomy. However, many of the entryways into cryptocurrency markets have a hefty fee between 1-4% of the overall purchase and in order to obtain fiat for crypto the fees are just as high. Many people believe the high fees associated with crypto on-ramps are a deterrent to mass adoption and a concept that minimizes friction will triumph in the end.

Also Read: Only 375 Days Left for McAfee’s $1M Bitcoin Price Wager

The Fees Associated With Fiat-to-Crypto On-Ramps and Off-Ramps

In order to get into the cryptoconomy, there are a few different ways, like earning digital assets for certain services performed. You can also obtain cryptocurrency from popular exchanges that allow people to swap fiat for bitcoin or a variety of other coins. However, it can be pretty costly to get into crypto markets and just as expensive to exit as many companies charge anywhere between 1-4% of the overall sale.

For instance, one of the most popular on-ramp methods in the crypto world is using Coinbase. The San Francisco exchange “charges a spread of about one-half of one percent (0.50%) for digital currency purchases and digital currency sales.” The spread could change due to market fluctuations and Coinbase also charges another fee in addition to the spread. Coinbase charges customers 3.99% for credit or debit purchases and 1.49% for bank-based purchases. The Coinbase fee disclosure also states:

If the total transaction amount is less than or equal to $10, the fee is $0.99.
If the total transaction amount is more than $10 but less than or equal to $25, the fee is $1.49.
If the total transaction amount is more than $25 but less than or equal to $50, the fee is $1.99.
If the total transaction amount is more than $50 but less than or equal to $200, the fee is $2.99.

More recently Square’s Cash App has become a well known choice for buying and selling BTC. Yet despite the popularity, lots of people complain about the app’s fees per transaction. The Cash App also has two types of fees for U.S. users who utilize the application to either enter or exit the cryptoconomy using BTC. First, the Cash App charges a flat 1.75% fee for all purchases and sales, but the platform also charges a “volatility fee” based on price movements. The Atlanta-based payment processor Bitpay charges a fee of 1% per processing fee and the company explains that “merchants may choose to pass this fee on to the buyer.” According to a report published in March by Frank Chaparro, Gemini “has the highest trading fees for retail.” “Gemini’s fees come in at a whopping 2% or 200 basis points,” Chaparro wrote at the time.

The biggest problem in crypto fees.

These companies are robbing us blind.

It just cost me $12 to sell $2500 of BTC on @[email protected]’s Cash App is even worse, they charge a whopping 1.75 percent per BTC transaction.

The company that solves the onramp fee issue wins.

— SHILL GATES (@ImShillGates) December 13, 2019

Flat Fees, Variables, and Exchange Tokens

Fiat on and off-ramps to get into cryptocurrency have always involved fees, especially when it comes to deposits and withdrawals. A lot of the time these businesses calculate fees in two different ways and the most common is the flat fee. However, some exchanges have variable fees and unique tier structures that can change the fee depending on sale size and the market’s volatility.

Most exchanges in 2019 have similar rates and have adopted each other’s fee schedules and guidelines. Bitstamp has a minimum fee of €10 in withdrawal fees for SEPA transfers and international withdrawals will incur an additional 0.09% using the European exchange. Bitpanda charges 1.29% to sell and 1.49% to buy and Coinmama charges 5% if the customer uses a debit or credit card. Fees tend to be slightly higher when customers opt to use credit or debit cards and entry into the cryptoconomy in this manner can be costly.

Despite the fact that users don’t like high fees and it might deter newcomers from entering the cryptosphere, it seems high fees are here to stay. Over the last few years, however, exchanges have created exchange-developed coins that are used specifically to alleviate the cost of trading fees. This concept has become popular and exchanges like Binance, Coinflex, and Coinex have leveraged this idea. For instance, the Coinflex token FLEX is an SLP-based token that’s used to give Coinflex traders payouts depending on how much volume the user trades. FLEX tokens are then used to reduce the cost of trading fees on the exchange “incurred during the previous day.”

Bitcoin.com is also launching an exchange token called BCE and according to the whitepaper: “Users will get a discount on exchange fees by paying with the BCE token as per the discount schedule — the discount schedule will be refreshed at year five.” The first year will save users 50%, the second year 25%, year three 12.5%, year four 6.75%, and the fifth year will be announced nearer the time. It’s quite possible that exchange tokens could be the solution that helps reduce friction associated with crypto exchange fees.

What do you think about the costs to enter the cryptoconomy through fiat and the costs associated with going back to fiat? Let us know what you think about this subject in the comments section below.

Image credits: Shutterstock, Fair Use, Simpleledger.info, Pixabay, and Twitter.

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