Remittances from these workers account for 3 per cent to 5 per cent of gross domestic product in several emerging markets – in Nepal, it is as high as 10 per cent, according to data from the Global Settlement Network.
Concerns over remittance flows have escalated after the US warned against toll payments to Iran for ship passage through the Strait of Hormuz, which has largely been blocked amid the ongoing conflict between the two countries.
“There has been a quiet but noticeable informal pivot among South Asian migrant workers, including a significant number from India, towards digital tokens such as stablecoins in the period following the Iran conflict,” said Anndy Lian, a Singapore-based adviser to governments on blockchain and information technology.
“Rather than routing everything through traditional dollar-linked banking channels, a slice of remittances is now moving via instruments like USDT,” he said, referring to the Tether stablecoin backed by the US dollar.
A stablecoin is a type of cryptocurrency designed to maintain a stable value by pegging it to a reserve asset, which could be a fiat currency or other assets, such as gold.
Stablecoins currently account for about 3 to 4 per cent of overall remittances of Gulf-based workers, according to Lian, suggesting that these workers still mostly prefer to transfer money through banks and licensed operators.
Millions of people from India, Sri Lanka, Pakistan, Bangladesh and other countries have worked in the oil-rich Middle East for years. However, their job uncertainties have increased in recent months as the Iran war entangled other Gulf states.
Lian said a key attraction of the widely used USDT was that it commanded a higher value by about 4 to 5 per cent in markets such as India, compared with the official exchange rate for the US dollar, allowing recipients to get more value.
The prospect of sanctions related to the Iran war has raised fears about disruptions to the dollar-based monetary transfers through traditional modes, although there is no sign that Washington is planning to block legitimate remittances, according to Lian.
Several Gulf countries, such as the UAE, Bahrain and Saudi Arabia, have introduced regulations in recent years to allow stablecoins in their financial systems.
Workers in the Middle East are increasingly turning to stablecoins for remittances, given that such transfers are faster than traditional banking systems, according to Lian.
“The shift is real, but incremental, and is concentrated among the more tech-comfortable, urban-linked segment of the diaspora rather than the broader labour corridors,” he said.
Raj Kapoor, president of the India Blockchain Alliance, said global banks had tightened their Gulf operations due to the Iran war, which had affected their treasury and other functions that underpinned remittance flows.
Stablecoins, particularly the USDT and USDC, have filled the gap for financial settlements in the region, according to Kapoor.
“The Iran war has functioned less as a cause and more as a powerful accelerant of a shift that was already structurally under way,” he added.
Ryan Kirkley, co-founder and co-CEO of Global Settlement Network, said the Iran war had caused disruption not only to energy supplies and dollar liquidity but also remittances.
Countries across South Asia and Southeast Asia are reliant on these monetary transfers, with India alone having received US$125 billion in remittances last year and Gulf nations contributing to a third of the figure, according to Kirkley.
Given their significance, compliance standards for stablecoins and tokenised payments should be enhanced and for migrant workers to have this option to send their money home amid the Iran war, Kirkley said.
“If a Gulf bank pulls back on dollar clearing or a UAE exchange house tightens onboarding because of secondary-sanctions exposure, the first thing to feel it is not the oil tanker, it is the construction worker in [the city of] Sharjah trying to send 2,000 UAE dirhams [US$545] home,” he said.
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.