Banks and traditional institutions that handle fiat still limit usage and application for different reasons including regulatory requirements. This problem puts cryptocurrency at the forefront of the drive for financial autonomy, supporting people’s ability to conduct their transactions privately and out of the government’s control.
Several crypto and blockchain companies recognize this issue and have created crypto-powered options that simplify financial affairs and cross-border transactions. These solutions are also great for the providers, as they support widespread adoption of the asset as well as the company’s products. For instance, Ripple, the company behind the XRP cryptocurrency, created a network that uses blockchain technology, through XRP, to facilitate cross-border payments among traditional financial institutions. Continuous use of the Ripplenet network has improved Ripple’s valuation and pumped the XRP price, providing returns to investors.
Traditional Banking Limitations for Students
The constraints of traditional banking are problematic for many, especially for international transactions. These problems are more pertinent for international students who relocate for school and need to pay tuition and accommodation costs. Even when these are sorted, students may require financial assistance from parents and family back home, especially since the number of hours students’ jobs allow is limited.
Unfortunately, cross-border transactions face difficult obstacles. Firstly, there are regulations that may complicate fiat transfers between specific regions. Laws may prohibit specific currency pairs, which might force people to make multiple fiat conversions to transfer funds. Regulation may also affect third-party services that would have made the transfers easy.
Another common problem with cross-border transactions is the high fees. The cost of sending fiat from one country to another can be very steep and considerably reduce the amount of money eventually received at the end of the transaction. According to a JPMorgan report, corporate organizations spend $120 billion per annum as fees needed to move $23.5 trillion across countries.
Furthermore, fiat transfers may require heavy documentation, which also complicates the process as payment processors or financial firms may have to confirm submitted documents. Finally, cross-border fiat transfers are slow and may take a few working days before completion.
The Appeal of Cryptocurrencies
Cryptocurrencies like Bitcoin (BTC) represent a disruption in the regular way people conduct financial transactions, especially in developing countries. The basic appeal of Bitcoin, at its creation, is that it allows peer-to-peer transactions that need no governing or centralized authority. All of the necessary checks and balances required of the system are coded into the network and supported by inherent features of blockchain technology that ensure transactions are transparent, secure, and cost-effective. The appeal of cryptocurrencies, especially for students, is in the accessibility, relative simplicity, and efficiency. Generally, cryptocurrencies have a low entry barrier, which makes it easy for interested users to apply the technology to financial needs.
Benefits of Cryptocurrency for Cross-Border Transactions
Cryptocurrency transactions are instantaneous. Anyone can send crypto from one wallet to another within a few seconds, depending on factors like network congestion. This allows students studying overseas to receive funds from their friends and family as quickly as needed.
The benefits of cryptocurrency transactions extend to cost. Many blockchain networks charge minimal fees to process transactions from one wallet to another. This means that the amount sent is precisely or nearly the same as the amount eventually received.
In addition to speed and low charges, crypto transactions are also transparent. Blockchain technology keeps a record of all transactions as part of a public ledger so that anyone can verify details such as amount and timing. This helps to maintain trust between the sender and receiver, whether it’s a family member or friend.
Unfortunately, there are also a few limitations. For instance, regulatory requirements may also affect crypto transactions, especially at the institutional level. While families and friends can send money to students for daily expenses, schools receiving tuition and accommodation fees may not be legally permitted to officially accept crypto payments. In states with difficult crypto regulations, such as Hawaii and New York, crypto adoption could be difficult. Regulation may also impose a tax on cryptocurrencies received, which could reduce the amount of money a receiver gets after the transaction is complete.
The Future of Student Finance and Cryptocurrencies
Although cryptocurrencies are becoming more popular, adoption is generally in its early stages. This means that there is still a lot of potential in the cryptocurrency sector that remains untapped by students who need it the most. In addition to interacting with digital assets via crypto trading platforms, there are also decentralized finance (DeFi) platforms that can extend the use of cryptocurrencies for more than simple cross-border transitions. DeFi can help with student loans and even crowdfunding for indigent students who may need assistance. As the use cases for crypto expand and adoption increases, students will likely benefit significantly from the extended use of cryptocurrencies for financial access and inclusion.
