Arcane Research: Bitcoin is helping undocumented immigrants send money home

The global remittance industry is a $500 billion market, but for undocumented immigrants who lack financial resources, Bitcoin has become a lifeline, according to Arcane Research.

For immigrants seeking the proverbial "American Dream" in the New World, finding ways to send money home can be a nightmare.

This is especially true for undocumented immigrants, who face additional legal and economic barriers to sending remittances. But for the tech-savvy among them, a surprising savior is emerging: Bitcoin.

Cryptocurrency analysis firm Arcane Research today released new findings on the current state of the Bitcoin peer-to-peer market. The firm found that cryptocurrencies are helping immigrants because these digital assets enable cross-border transactions, tax-free, cheap and fast remittances, and without any of the red tape involved in the trillion-dollar remittance market.

More importantly, the report found that undocumented immigrants in particular are increasingly turning to peer-to-peer marketplaces to buy Bitcoin and repatriate funds back home. According to Arcane, gift cards are the preferred payment method on these types of exchanges because they can avoid banking restrictions and KYC requirements.

“Gift card transactions help undocumented immigrants transfer value to family and friends,” the report said. This payment method is popular in North America and, according to Arcane Research, is one of the reasons for the expansion of Paxful, an emerging P2P Bitcoin exchange in the region.

Paxful’s trading volume is four times that of LocalBitcoins, the leading North American P2P exchange, according to Useful Tulips, a metrics site that tracks the industry.

Matt Ahlborg of Useful Tulips explained to Arcane Research how immigrants can use gift cards to send Bitcoin remittances to relatives abroad:

“Western immigrants transfer value abroad through gift cards on Paxful. Gift cards are purchased by immigrants in local stores,” Ahlborg said, “and then take a photo of this gift card and send the photo to friends and family abroad. They then sell these gift cards for BTC on Paxful. They then sell the BTC to buyers in the local market through a P2P platform, which converts the BTC into local currency.”

Although this process may seem cumbersome, the fact is that it is faster and cheaper than traditional methods. When the political or economic situation is more dire, Bitcoin becomes a more viable option for remittances. Venezuela is a clear example, where almost all remittance services are banned from operating in the country due to sanctions imposed by the US government.

Ariana Entralgo, a Venezuelan living in Argentina, said: “Paypal, Western Union, MoneyGram do not work in Venezuela. I used to send money informally through one of the companies promoted on Instagram. What I do now is that I buy Bitcoin here through LocalBitcoins and once it is on my account I simply switch the tab to Venezuela and sell BTC, asking the buyer to deposit it into my father’s account. If the trader is fast, everything takes 30 minutes; if he is slow, it can take up to two hours.”

Entralgo explained that this method has another advantage: “You don’t have to pay huge commissions, which is better for you because in most cases the Bitcoin rates in Venezuela are very attractive.”

Arcane Research reports that 43% of all Bitcoin transactions in Latin America take place in Venezuela.

Venezuela is currently experiencing a migration crisis. According to the Brookings Institution, more than 4 million Venezuelans fled the country in 2019, many heading to neighboring Colombia. With few major remittance services, Bitcoin could be the light at the end of the tunnel for Venezuelans living abroad who need to send money home.

It looks like the government of Nicolas Maduro, which has long looked to cryptocurrency as a potential solution to its economic woes, is seeing the light: Earlier this year, it launched an official, state-run bitcoin remittance service.