Bahamas payment platform is latest to offer crypto remittance

Migrants are sending money home to family and friends at unprecedented rates despite the high costs and challenges of traditional remittances.

Cryptocurrency proponents have long cited their technology as the answer for money transfers in regions like Latin America, where the majority of people are unbanked. But those efforts have failed to gain much traction as skepticism over digital assets remains and cash is still king.

Island Pay is the latest company to enter the market on Tuesday, launching a digital wallet in Latin America and the Caribbean that will use Circle’s USDC stablecoin as its primary currency. Called CiNKO, the wallet will be available in more than 30 countries, letting users fund prepaid cards, transact with merchants and make peer-to-peer payments, even if they don’t have a bank account.

“Our goal is to continuously look for ways to advance financial inclusion in the region and enhance financial experiences for both the unbanked and banked populations,” Island Pay Chief Executive Officer Richard Douglas said.

The Bahamas-based fintech company and payment platform isn’t alone. Dozens of crypto wallets and cross-border payment systems already exist.

Circle is working with traditional cash-transfer company MoneyGram International, as well as Stellar, an open network for storing and moving money. Mexico-based Bitso has also partnered with Stellar to allow businesses in places like Argentina, Colombia and Mexico to transact in USDC. Meanwhile, Western Union Co. has been rolling out its own digital payment platforms as it has seen increased crypto competition.

The CiNKO wallet is part of the broader push to roll out stablecoins and decentralised finance protocols in Latin America, Circle’s Chief Business Officer Kash Razzaghi said in an email. A recent paper by Circle estimated the technology could reduce the cost of remittances by 80%. While it costs nothing to receive USDC on CiNKO wallets, there is a “gas fee” depending on the blockchain the transaction is processed through.

Transferring money through traditional financial intermediaries can sometimes take days, and the average cost of sending $200, for example, is 6.2%, according to the World Bank data.

Even so, Latin America and the Caribbean saw remittances soar 27% in 2021 and 11% in 2022, reaching $145 billion last year. While growth in the region is expected to slow to 3.3% this year, remittances are still expected to hit an all-time high.

One of the main barriers to crypto remittances is ease of use, said Monica Talan, the founder of CryptoConexion, an educational platform that provides information about Web3 and decentralized finance. In most Latin American countries there are few places to spend Bitcoin or Ether.

“The biggest challenge is the off-ramp,” she said. “How do you turn tokens into your local currency, particularly if you don’t have a bank account?”

Douglas said USDC — which is US dollar backed and trades one-to-one with the greenback — eliminates the wild rate swings of traditional crypto, and there’s already a growing ecosystem of merchants that accept it. The ability to move CiNKO’s USDC balance onto a prepaid card makes it immediately usable, he said.

CiNKO, which will be available for both Android and Apple iPhone users, hopes to onboard 100,000 users — primarily in Central and South America — through next year, said Douglas. Founded in 2016, Island Pay cut its teeth providing digital payment services in the Caribbean, and was one of the first companies to work with a central bank digital currency, when it began working with Bahamas’ Sand Dollar, which was launched in 2021.

While the company is focused on Latin America, Douglas said, “we have the ability to roll out this technology anywhere.”

© 2023 Bloomberg