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Why would two currency exchanges (say USD->BTC then BTC->EUR) ever be cheaper than one (USD->EUR) ? There’s nothing special about Bitcoin that means it will hav

Why would two currency exchanges (say USD->BTC then BTC->EUR) ever be cheaper than one (USD->EUR) ? There’s nothing special about Bitcoin that means it will have lower spreads than other FX exchanges.

tudorconstantin 8y ago
It's the transfer time and fees between non SEPA countries that's cheaper and much faster. And that includes fiat->BTC->fiat commissions and tx fees.
- netsharc 8y ago
  Currency exchangers work by having pools of money in many currencies and countries, so if you want to exchange USD to GBP, they add your money to their USD pool, and take out the same amount out of their GBP pool. How fast can you do it? Probably as fast as sending an data packet to the UK. I don't see why bitcoin has to be used, well maybe if the exchange doesn't have a lot of capital and is buying BTC with the USD and selling it for GBP.
  - tudorconstantin 8y ago
    The issue is with transmitting money in another country. That's what takes several days (from Germany to USA for example). They buy BTC in Germany for EUR, send them to the guy in USA who then sells those for USD. It probably takes less than 5 minutes the whole operation.
    - madeofpalk 8y ago
      Read the comment again. Exchanges like Transferwise work by not actually transferring your money internationally. Once Transferwise receives my money in their UK account, they just instantly transfer the money from their Aus account to the recipient. It doesn't take several days because my money never actually went overseas
jpalomaki 8y ago
I don't think real issue here are the currency exchange fees, but the transfer fees charged by banks and the logistics related to doing bank-to-bank cross-border payments. When transferring via Bitcoin, you only to get the recipients Bitcoin address and that is. Do a bank transfer to another side of the world and you need to find out bunch of information for the recipient (their bank details, probably address etc). There's also a chance you will get some of this wrong and then there will be a manual hassle to sort things out.
- joosters 8y ago
  How are they avoiding these charges? The customer isn't requesting bitcoin, so you still need to transfer the money from the recipient exchange into their 'fiat' account...
  - speedplane 8y ago
    This is obvious... once you establish trust from Bank A to Bank B (and correspondingly Bitcoin account A and B), you can transfer the money very quickly with 100% assurance it was transferred to A and B. The older way of doing this would be based on expensive contracts, legal regulation, and potentially intermediaries, who will happily take their own cut.
    - joosters 8y ago
      The only intermediaries being added are the bitcoin exchanges. The loan originator has to initiate a bank transfer from their account into bitcoin exchange 1, and from bitcoin exchange 2 into the customer's account. That's now two 'legacy banking transfers' instead of the normal 1. More intermediaries, more transfers, more costs (and more risk of money loss unless there is a similar amount of regulation & contracts in both cases).
      - speedplane 8y ago
        Not quite right. The old way of doing it actually worked like this: Bank A in country X transfers money mega-bank B in country X. Mega-bank B transfers money to mega-bank C in country Y. Mega-bank C in country Y then transfers it regional bank D in country Y. Bitcoin will allow smaller banks to transfer money without the help of the giant banks who have built up relationships (and binding legal agreements) over the years. Honestly, even though some large banks bullish on bitcoin, the real benefit will accrue to the smaller institutions.

tudorconstantin 8y ago

It's the transfer time and fees between non SEPA countries that's cheaper and much faster. And that includes fiat->BTC->fiat commissions and tx fees.

netsharc 8y ago
Currency exchangers work by having pools of money in many currencies and countries, so if you want to exchange USD to GBP, they add your money to their USD pool, and take out the same amount out of their GBP pool. How fast can you do it? Probably as fast as sending an data packet to the UK. I don't see why bitcoin has to be used, well maybe if the exchange doesn't have a lot of capital and is buying BTC with the USD and selling it for GBP.
- tudorconstantin 8y ago
  The issue is with transmitting money in another country. That's what takes several days (from Germany to USA for example). They buy BTC in Germany for EUR, send them to the guy in USA who then sells those for USD. It probably takes less than 5 minutes the whole operation.
  - madeofpalk 8y ago
    Read the comment again. Exchanges like Transferwise work by not actually transferring your money internationally. Once Transferwise receives my money in their UK account, they just instantly transfer the money from their Aus account to the recipient. It doesn't take several days because my money never actually went overseas

jpalomaki 8y ago

I don't think real issue here are the currency exchange fees, but the transfer fees charged by banks and the logistics related to doing bank-to-bank cross-border payments. When transferring via Bitcoin, you only to get the recipients Bitcoin address and that is. Do a bank transfer to another side of the world and you need to find out bunch of information for the recipient (their bank details, probably address etc). There's also a chance you will get some of this wrong and then there will be a manual hassle to sort things out.

joosters 8y ago
How are they avoiding these charges? The customer isn't requesting bitcoin, so you still need to transfer the money from the recipient exchange into their 'fiat' account...
- speedplane 8y ago
  This is obvious... once you establish trust from Bank A to Bank B (and correspondingly Bitcoin account A and B), you can transfer the money very quickly with 100% assurance it was transferred to A and B. The older way of doing this would be based on expensive contracts, legal regulation, and potentially intermediaries, who will happily take their own cut.
  - joosters 8y ago
    The only intermediaries being added are the bitcoin exchanges. The loan originator has to initiate a bank transfer from their account into bitcoin exchange 1, and from bitcoin exchange 2 into the customer's account. That's now two 'legacy banking transfers' instead of the normal 1. More intermediaries, more transfers, more costs (and more risk of money loss unless there is a similar amount of regulation & contracts in both cases).
    - speedplane 8y ago
      Not quite right. The old way of doing it actually worked like this: Bank A in country X transfers money mega-bank B in country X. Mega-bank B transfers money to mega-bank C in country Y. Mega-bank C in country Y then transfers it regional bank D in country Y. Bitcoin will allow smaller banks to transfer money without the help of the giant banks who have built up relationships (and binding legal agreements) over the years. Honestly, even though some large banks bullish on bitcoin, the real benefit will accrue to the smaller institutions.