Just sending money from abroad to Serbia costs you too much, takes too long, and can potentially cost the person you are sending money to. Is there a faster and cheaper solution?
Why is that so, and how can it change? Globally, the money transfer industry is worth 689 billion dollars, but it has a problem that creates serious inconvenience for families who depend on this form of income.
Namely, many families in Serbia depend on fathers, mothers, sons, daughters, relatives and friends who went to work abroad and who regularly send part of their earnings every month. However, an average of 7% of these funds are lost due to the fees charged by remittance companies. In some cases, depending on the country of origin, commissions can be as high as 15%.
The percentage of money lost due to commissions was further increased by the provider used. Sending money through online transfers or mobile apps is the most cost effective, but for those who don’t have a bank account or internet access, it’s simply not feasible.
Instead, these people have to visit a bank, post office, transfer operator or other money transfer service provider – and each of them charges a fee to provide this service.
In addition to the already high remittance rates, recipients sometimes have to pay extra to receive the funds, and the tax administration of the country where they reside may require some taxes to be paid. In Serbia, this means that a gift tax, which can be between 1.5% and 2.5%, is paid on the money received.
In addition to this, recipients of funds often have to wait between 5 and 10 days for the transfer to take place. During this period, the value of funds received from abroad may increase but may decline, which means that the recipient receives significantly less than what was sent. A perfect example of this is the fluctuating US dollar against the dinar, where up to 10% of the value of a shipment can be lost in just two days.
Serbian workers who earn their wages abroad while their families are here, in various ways, try to avoid the “money-grubbing” imposed by money transfer providers. Some send money to bus drivers who travel international lines with the popular maxim “Send and hope they won’t bring the house home, “while others bring cash with them when they make short visits to their home country or to send to colleagues from the same area. While these solutions are neither quick nor safe, they certainly help them save their earnings for the reasons they went abroad.
Could new, blockchain technology improve remittance conditions?
The existing structures for sending money are too complex, large and slow to accommodate the needs of citizens. So turning to new technologies and their applications can bring financial relief – blockchain technology and cryptocurrencies can solve the problem of high fees and slow money transfers.
While many countries with actively developing economies and high remittance prices could benefit from adopting new money transfer systems, countries like Serbia are the best market for new technologies. We have developed support infrastructures, such as the widespread use of smartphones, the Internet, and established ATMs for cryptocurrencies.
Conditions for sending money by bank transfer or Western Union are certainly not favorable, and the famous bus money transfer, although more favorable, is not always reliable, nor accessible if operated outside Europe. Serbia’s remittance industry is ready for a revolution – not only do we have the necessary infrastructure we have developed, but we also have a population that is technologically educated to the extent that the use of cryptocurrency to transfer money cannot be a problem.
Remittances sent to Serbia make up a significant portion of gross domestic product (8.56%), according to a World Bank report, and are an important factor in reducing poverty in the country. Since 2004, cash inflows to Serbia have been estimated at between 2.2 and 3.7 billion euros a year. In 2018, Serbia was ranked as the 37th country in the world by received funds, with most remittances sent from Germany.
According to the World Bank report on the Germany-Serbia remittance corridor, the cost of transferring money from Germany “can cost up to 10% of the total amount sent to Serbia, depending on the institution where the transaction is initiated and paid”.
When compared to the global average of 6.84% per transaction, it becomes apparent that sending funds to Serbia is much more expensive than it can and should be. A World Bank report suggests that one of the reasons for the price higher than the global average may be “lack of competition among money transfer companies” as there is currently only one company offering transfer services from Germany to Serbia. This shortage of Serbian banks in Germany is the result of the conflict that ravaged Yugoslavia during the 1990s. Serbian banks have not reopened their German branches since the UN Security Council imposed sanctions in 1992. As a result, Serbian banks can only play the role of “paying agents in Serbia on behalf of Western Union or commercial banks in Germany”. This is a situation that urgently needs change.
Thanks to the existing technological infrastructure, Serbia may be among the first countries to adopt a cryptocurrency remittance solution. The important point here is the fact that the benefits are universal. Both the sender and the recipient would have lower transfer costs than those resulting from sending to standard money transfer operators. In addition, the waiting time between sending and receiving funds would be reduced to minutes by sending between two crypto wallets – which, it must be acknowledged, is a significant contrast to sending remittances the traditional way, which can take days or even weeks. At this point, the best choices for the application we are talking about are stable cryptocurrencies, the so-called stablecoins. Unlike other cryptocurrencies, they are designed to maintain their value regardless of developments in the political or economic world, as well as to maintain purchasing power over time, regardless of inflation.
Should a sender attempt to send money converted to Bitcoin, it is possible that by the time the funds reach the recipient, that cryptocurrency would lose a significant portion of its value. This is why stable cryptocurrencies are the ideal solution. The Stablecoin market has gained a lot of popularity over the last 4 years, precisely because of the stability of these cryptocurrencies and their effectiveness in preserving value. Among them are algorithmic stable cryptocurrencies, which do not bind to decree (traditional) currencies that can fluctuate, but to their own algorithms that calculate and maintain value.
While they may sound complex, remitters will ultimately choose the solution that works best for them – able to quickly, safely and cheaply transfer their money to their desired destination. With stable cryptocurrencies, this is possible without worrying about where the person you are sending the funds to, and how quickly they will need the money. Anchor AG, has created an algorithmic stable cryptocurrency that binds to a stable and predictable growth trend of the global economy. Aleksandar Matanovic, co-founder of ECD.rs, states that citizens in Serbia and the region are aware of cryptocurrencies, what they are and how they are used. People are mostly interested in cryptocurrencies as a way to get rich quick.
What are the main crypto habits in the country and region? The crypto community is not big here, and there aren’t many enthusiasts for these currencies. My personal opinion is that the vast majority of people who are part of a crypto community are only there because they expect some kind of benefit, not because they truly believe in the potential that crypto has. When it comes to crypto traders, I would say the number is relatively large given the size of our market, but they do not organize events and do not attend conferences. Meetings are occasionally organized, and they are mostly held in Belgrade, but there are never as many people as one would expect from a city of this size. I find the situation more or less the same in the rest of the region.
What are the most popular cryptocurrencies in Serbia and the region?
Well, it’s really no different with the global situation … Bitcoin, Ethereum are in the first two places, then a few places are empty, then everything else.
Are there any vendors that accept cryptocurrencies in Serbia and the region? What currencies are in question?
Probably a few dozen, mostly bars and restaurants, but people rarely pay for these currencies.
What is the current regulatory and tax environment for people who buy and sell cryptocurrencies in Serbia and the region?
The regulation is currently incomplete. As far as taxation is concerned, the situation is even more ambiguous, probably because we first need clear legislation to define taxation. People from Serbia and the region, and I mean those who are not yet in the EU, mainly face problems sending and receiving decree money (traditional currencies) to and from global crypto exchange offices. Sometimes it’s even a challenge to register on one and verify your account.
How can people in Serbia and the region currently buy and sell cryptocurrencies, especially in exchange for their local currency? What options do they have? What are the easiest to use and cheapest in terms of transaction price and waiting period?
“For those who want to buy or sell cryptocurrencies in exchange for their local currency, there is almost no option other than using local online services and crypto ATMs. As in the world, cryptocurrencies are more expensive but remain the fastest way to get cryptocurrencies buy or sell, at least for those who have these ATMs in their cities. There are also local online exchange offices, but our market is small and shallow, so if you want to engage in serious real-time cryptocurrency trading, you must use global exchange offices”.
