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They account for billions of dollars in remittances to their home countries, but most are manual workers who do not earn the 5,000 dirham (US$1,350) minimum monthly income required to open a bank account in the UAE, it said.
Migrants also often use cash transfer services because they are cheaper, said Mohammad Jalal Uddin Sikder, a researcher in labour migration and a coordinator at the Center for Migration Studies in Bangladesh.
“Migrants carefully consider every cent. Going to the bank and sending any form of remittances entails high fees,” he said.
Money transfer services in the UAE typically charge a flat fee of 25 dirham per transaction.
But cryptocurrencies, which allow “peer-to-peer” transfers between users online without any intermediaries such as banks or financial authorities, can be better value still.
Migrants can buy crypto using credit cards or crypto exchange offices and then transfer it instantly to their families’ digital wallets. Their relatives will then have to convert the crypto to the local currency.
Transfer costs usually range from free to 0.5 per cent depending on the app used and the country coins are being sent to. There is also typically a charge for conversion in or out of local currencies, though some services charge as little as one cent.
Volatile market
As crypto services in the Gulf cash in, banks and other financial institutions are also trying to harness tech developments to make it easier and cheaper for migrant workers to send remittances home.
The UAE’s central bank has announced a “Digital Dirham” currency which it says will help ease cross-border payments and improve financial inclusion.
In March, it signed an agreement with India’s reserve bank to pilot a shared infrastructure to facilitate cross-border transactions of national digital currencies for remittances and trade.
The Foreign Exchange and Remittance Group, a UAE industry body for the money transfer industry, said in its 2022 annual report that its members are also increasingly offering mobile and digital payments in response to demand.
But some migrants who held cash in crypto say they are looking for less risky options.
Ahmed Abdel Fattah, an Egyptian migrant in the UAE, used to invest and send remittances in crypto, but he started to lose faith in digital assets after the 2022 market crash.
“I lost more than half of my investments,” said Abdel Fattah, a driver.
“It is a very volatile market. That is why I stopped investing in crypto and I am now thinking about other options.”
Howson said that take-up of cryptocurrencies and blockchain services will be limited where better, safer options exist.
“Crypto works for migrants, until it doesn’t,” he said.
“Blockchains are useful when you don’t trust political and financial institutions … (but) no one wants to be held accountable when things go wrong.”
This story was published with permission from Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, climate change, resilience, women’s rights, trafficking and property rights. Visit https://www.context.news/.
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