Since its creation in 2009, Bitcoin (BTC) and its fellow cryptocurrencies have developed many real-use cases—including easier payments, wealth preservation, and, for today’s main focus, getting competitive foreign exchange rates.
Forex rates are a tricky issue. They’re often dictated by their supply and demand relative to other countries. Sometimes, they can be controlled by the national governments in charge, making them unfair. When economic shocks, such as the one we experienced in 2020, are put into play, situations get even trickier.
Why forex rates are controlled
Foreign exchange controls are measures put in place by governments to restrict or limit the buying and selling of foreign currency.
For the most part, many countries have removed these controls. However, they still exist in some countries. This means that the people living under these conditions have limited access to foreign currency—that is if they aren’t completely cut off from it. To get their hands on foreign currencies, they’ll need to go to government-approved money changers. Even in those cases, there’s only a certain amount that you’ll be able to receive. The governments also set those exchange rates and record all the exchanges using government IDs.
You’re probably wondering: why are these controls even put in place?
Mostly, it’s because weaker economies can benefit from these controls. By putting these measures in place, exchange rate fluctuations don’t become so excessive.
Also read: How To Get Cryptocurrency In 2021
Additionally, these controls are designed to counter the effects of extreme speculation on the forex markets. If an economy were to begin crashing, these measures are often implemented to prevent further downward spirals.
The catch is that these advantages come at a cost.
First, these controls defeat the idea of free trade. Essentially, it disrupts the nature of a currency’s value to rise and fall. Market forces are a natural part of the cycle, so implementing these controls goes against the current and disrupts the whole process.
Second, these controls make it incredibly difficult for companies to send and receive cross-border payments. If the government tightly controls the exchange of foreign currencies, sending money to a country with these controls is extremely tedious and complicated. This also affects remittances and therefore prevents people from sending or receiving money abroad.
Lastly, the exchange rates implemented by the government are sometimes unfair. At times, they can be lower than the actual value of the currency, leading people to flock to black-market money changers to get the max value for their funds.
A possible workaround
Although they’re relatively new to the financial space, cryptocurrencies provide a way for people to get competitive forex rates. Let’s put this into a real-world example.
Note: All calculations are based on the values at the time of writing (August 16, 2021).
Let’s say that you’ve got 100 United States Dollars (USD) and you want to convert it into Nigerian Naira (NGN). At the exchange rate available, you’d get 41,150 NGN. For some, that’d probably be okay. However, there’s a way to maximize the value even further.
Now, let’s try converting into BTC first using Paxful, the world’s leading peer-to-peer crypto marketplace, as our platform of choice. If you buy Bitcoin first, you’d get 0.0021 BTC at the current exchange rate.
By using the same platform, you can convert your BTC into NGN easily. Sell that 0.0021 BTC and get paid in NGN via bank transfer or any of the 400 payment options available. You can sell your BTC at a higher price on Paxful, allowing you to even make money on the exchange. To give you a better idea, these are buyers willing to pay more than the current BTC market value:
Buyers with 41% rates per Bitcoin/Get on dollar means they are willing to pay 41 percent higher than the market price. At that rate, it’s possible to make just above 71,000 NGN from selling 0.0021 BTC.
Also read: 7 Websites to Track Live Bitcoin Exchange Value
The future of conversion
With platforms like Paxful on the rise, you can do all your conversions yourself plus earn a little extra on the side. This is what makes cryptocurrency so revolutionary: it puts the power of your money in your hands.
You can make all these transactions on your own without the help of a third party. It also proves that cryptocurrencies like BTC don’t always have to be about making money, speculation, and investment. They can actually help in real-world situations like sending money abroad without having to pay excessive fees or have the government control the way you use your money.
The sooner people start to realize this, the more crypto adoption will rise. As soon as the world realizes that there’s more than meets the eye with cryptocurrencies like Bitcoin, all the speculation will fly out the window and we can finally use it the way it was meant to be used: as a new kind of money that empowers and embraces our inner entrepreneurial spirit.
Leave a comment