Migrants in UAE turn to crypto to send funds home

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Nearly 90% of the UAE population are migrants Many say crypto is a cheaper and easier way to send money Experts warn users they are vulnerable to scams and volatility

(Thomson Reuters Foundation) Muhammed Bilal had to wait his turn outside a money transfer office in the scorching heat of Dubai to send $1,000 to his wife and parents in Pakistan each month, at a cost of around $7 by transfer.

He has since switched to an app that allows him to send money instantly with no transfer fees, joining a growing number of migrants in the UAE using cryptocurrencies and blockchain services to send funds quickly and conveniently. lower cost.

Now I don’t have to wait in queues anymore, said Bilal, a 27-year-old customer service agent.

I do it at home from my cell phone and the money is sent in seconds.

The Middle East and North Africa had the fastest growing crypto market in the world last year, according to blockchain data platform Chainalysis, with crypto transfers in the region increasing by 48 % to hit $566 billion in the year to June.

The use of crypto for remittances and savings, along with increasingly permissive regulations, are helping drive growth in the region, he added.

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The UAE plans to make Dubai the first fully blockchain-powered city and has crafted laws and regulatory systems around digital assets as it strives to become a hub for the crypto industry.

Antti Arponen, CEO of Dubai-based financial technology company Pyypl, said 5 million people have downloaded the app since its launch in 2017.

Eighty percent of our users are migrants and their numbers have grown exponentially in recent years, he told the Thomson Reuters Foundation.

Migrant workers said crypto offered a better deal than traditional banking and money transfer services, despite a market crash last year that left many digital coin holders with heavy losses.

With crypto, there are almost no easy, instant and safe fees, says Gerard Dingal, a 30-year-old pastry chef, who uses crypto and Pyypl to send money to his mother and sister in the Philippines .

But such platforms expose users to the risk of scams and highly volatile currencies, said Pete Howson, a crypto expert and assistant professor of international development at Northumbria University in the British city of Newcastle.

User funds are not insured when using these types of platforms (crypto and blockchain-based applications), as they are with a bank, he said.

Migrants in search of value

Nearly 90% of the UAE’s 9.3 million people are migrants, according to a report by the United Nations Capital Development Fund last year, many of whom come from India, Pakistan, Bangladesh, India. Indonesia and Egypt.

They represent billions of dollars in remittances to their home countries, but most are manual workers who do not earn the minimum monthly income of 5,000 dirhams ($1,350) required to open a bank account in the United Arab Emirates. United, he said.

Migrants also often use money transfer services because they are cheaper, said Mohammad Jalal Uddin Sikder, labor migration researcher and coordinator at the Center for Migration Studies in Bangladesh.

Migrants carefully scrutinize every penny. Going to the bank and sending any form of remittance carries high fees, he said.

Money transfer services in the United Arab Emirates generally charge a flat fee of 25 dirhams per transaction.

But cryptocurrencies, which allow peer-to-peer transfers between online users without any intermediaries like banks or financial authorities, can be even more interesting.

Migrants can purchase crypto using credit cards or crypto exchanges and then instantly transfer it to their family’s digital wallets. Their relatives will then have to convert the crypto into the local currency.

Transfer fees typically range from free to 0.5% depending on the app being used and the country the coins are being sent to. There are also usually fees for converting into or out of local currencies, although some services only charge a penny.

Volatile market

As crypto services in the Gulf cash in, banks and other financial institutions are also trying to harness technological developments to make it easier and cheaper for migrant workers to send remittances home.

The Central Bank of the United Arab Emirates has announced a Dirham digital currency which it says will help facilitate cross-border payments and improve financial inclusion.

In March, it signed an agreement with the Reserve Bank of India to pilot 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 money in crypto say they are looking for less risky options.

Ahmed Abdel Fattah, an Egyptian migrant in the United Arab Emirates, used to invest and remit in crypto, but he began to lose faith in digital assets after the stock market crash of 2022.

I lost more than half of my investments, says Abdel Fattah, a driver.

It is a very volatile market. This is why I stopped investing in crypto and am now considering other options.

Howson said adoption of cryptocurrencies and blockchain services will be limited where better, more secure 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.

($1 = 3.6724 UAE Dirham)

Reporting by Menna Farouk, editing by Sonia Elks

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