4 ms·

It's not quite as simple as that, though. To, for example, send money from the US to Kenya via bitcoin, you need somebody in the US who is willing to sell you t

by flavor8 12y ago

It's not quite as simple as that, though. To, for example, send money from the US to Kenya via bitcoin, you need somebody in the US who is willing to sell you their bitcoin in exchange for dollars, and somebody in Kenya who is willing to buy your bitcoin in return for shillings (which are then paid to the destination seller). Creating the technology that makes this relatively transparent is quite doable, but you still need an active bitcoin market in both financial markets. If the general pattern of value transfer is unidirectional (e.g. remittances) then there needs to be a viable flow of bitcoin out of the destination country (i.e. your Kenyan bitcoin purchaser needs to regularly make purchases from foreign markets in bitcoin); that's tricky to establish. On top of this issue, big banks charge only cents to send large amounts of cash internationally (according to somebody I talked to a couple months ago, Citi charges 10c per international ACH transaction assuming you have $250k on deposit) so the volume in the bitcoin market has to be built from small transactions -- there's no real upside to doing large transactions over bitcoin vs international ACH.

benmanns 12y ago
If the difference between USD - BTC - KES vs KES - USD gets too large, there will be an opportunity for someone to arbitrage.
adrianwaj 12y ago
Not sure if this is a relevant point, but as a global reserve currency, the US dollar could act as a gateway for local bitcoin traders to enter and exit their bitcoin positions. Whereby so long as a USD/BTC market exists and a USD/local market exists (which there is due to the petrodollar), it doesn't matter what local demand is for BTC - the USD can act to buffer any lack of local BTC demand/supply. Shillings > USD > BTC or BTC > USD > Shillings.
mrb 12y ago
"big banks charge only cents to send large amounts of cash internationally" This is utterly false. The entire reason the remittance industry exists (Western Union, etc) is because banks don't offer cheap ways of sending money internationally, and/or recipients often don't even have bank accounts. In fact, remittance fees are so high[1] that this is precisely why many analysts see Bitcoin's potential to disrupt this industry[2]. [1] Average remittance cost in the world: 8%. Average to Africa: 12%! Nigeria to Ghana: 22%! Source: http://www.irinnews.org/report/99977/remittance-rip-offs http://www.irinnews.org/report/99977/remittance-rip-offs [2] http://www.businessweek.com/articles/2013-10-08/will-migrant-workers-drive-bitcoins-mundane-future http://www.businessweek.com/articles/2013-10-08/will-migrant...
- sanswork 12y ago
  You missed out on the word large. Remittances are generally very small. Also the cost of remittances isn't in moving the money it's in having lots of people in the destination country that your family can go to and get cash from. There is no indication that bitcoin would make that cheaper.
  - mrb 12y ago
    The most blatant way Bitcoin can make remittances cheaper is if the recipient can directly spend the bitcoins. So no more Western Union = no middle man pocketing remittance fees!
    - sanswork 12y ago
      Yes, but people can't so it doesn't.
      - mrb 12y ago
        Yes they can, and here is one more example: according to the World Bank the lowest remittance costs to send 140.00 EUR from Italy to China are 12.00 EUR (this is 8.6%!) see http://remittanceprices.worldbank.org/en/corridor/Italy/China http://remittanceprices.worldbank.org/en/corridor/Italy/Chin.... However thanks to Bitcoin exchanges existing in both Europe and China, and with their low fees of typically <1% (so <2% total), the costs with Bitcoin would be less than 2.80 EUR, which is much lower than 12.00 EUR. So do not say that Bitcoin "would not" make remittance costs cheaper. It does.
        sanswork 12y ago
        The world bank includes a very small number of possible remittance services and basically ignores any of the small grey networks most people actually use. http://www.cabel.it/media/documents/cemla_slides.pdf http://www.cabel.it/media/documents/cemla_slides.pdf has an example of a remittance service that offers fees of 1.15%(See page 7). So that service would cost 1.61 EUR. With bitcoin the process would be: Transfer money to BTC-E which is 1% + the payment source fee so we're already over and we haven't even gotten our bitcoin yet. ok lets try another one since that didn't work out and I'm sure we can find cheaper. Kraken is free for SEPA deposits. I can't find any example fees for SEPA transfers from Italy to Germany but lets say 0.10. Trading fee: 0.28 Withdraw fee is in btc(0.00050) so hard to say but currently around 0.31 then there is the bitcoin fee to deposit on the chinese side in okcoin which is another 0.06 then luckily its free to trade at ok coin and only 0.4% to withdraw in CNY which is 0.56 Total cost: 1.31 So assuming no slippage(which there would be since any country receiving a lot of remittances like this would be a buyers market) you can go through 3 extra transfers and save yourself 0.30 EUR on your 140EUR transfer. This also assumes my SEPA fee is right which I think it might be quite low for reality. Italian banks tend to have very high transfer fees even nationally.

by flavor8 12y ago

benmanns 12y ago

If the difference between USD - BTC - KES vs KES - USD gets too large, there will be an opportunity for someone to arbitrage.

adrianwaj 12y ago

Not sure if this is a relevant point, but as a global reserve currency, the US dollar could act as a gateway for local bitcoin traders to enter and exit their bitcoin positions. Whereby so long as a USD/BTC market exists and a USD/local market exists (which there is due to the petrodollar), it doesn't matter what local demand is for BTC - the USD can act to buffer any lack of local BTC demand/supply. Shillings > USD > BTC or BTC > USD > Shillings.

mrb 12y ago

"big banks charge only cents to send large amounts of cash internationally" This is utterly false. The entire reason the remittance industry exists (Western Union, etc) is because banks don't offer cheap ways of sending money internationally, and/or recipients often don't even have bank accounts. In fact, remittance fees are so high[1] that this is precisely why many analysts see Bitcoin's potential to disrupt this industry[2]. [1] Average remittance cost in the world: 8%. Average to Africa: 12%! Nigeria to Ghana: 22%! Source: http://www.irinnews.org/report/99977/remittance-rip-offs http://www.irinnews.org/report/99977/remittance-rip-offs [2] http://www.businessweek.com/articles/2013-10-08/will-migrant-workers-drive-bitcoins-mundane-future http://www.businessweek.com/articles/2013-10-08/will-migrant...

sanswork 12y ago
You missed out on the word large. Remittances are generally very small. Also the cost of remittances isn't in moving the money it's in having lots of people in the destination country that your family can go to and get cash from. There is no indication that bitcoin would make that cheaper.
- mrb 12y ago
  The most blatant way Bitcoin can make remittances cheaper is if the recipient can directly spend the bitcoins. So no more Western Union = no middle man pocketing remittance fees!
  - sanswork 12y ago
    Yes, but people can't so it doesn't.
    - mrb 12y ago
      Yes they can, and here is one more example: according to the World Bank the lowest remittance costs to send 140.00 EUR from Italy to China are 12.00 EUR (this is 8.6%!) see http://remittanceprices.worldbank.org/en/corridor/Italy/China http://remittanceprices.worldbank.org/en/corridor/Italy/Chin.... However thanks to Bitcoin exchanges existing in both Europe and China, and with their low fees of typically <1% (so <2% total), the costs with Bitcoin would be less than 2.80 EUR, which is much lower than 12.00 EUR. So do not say that Bitcoin "would not" make remittance costs cheaper. It does.
      - sanswork 12y ago
        The world bank includes a very small number of possible remittance services and basically ignores any of the small grey networks most people actually use. http://www.cabel.it/media/documents/cemla_slides.pdf http://www.cabel.it/media/documents/cemla_slides.pdf has an example of a remittance service that offers fees of 1.15%(See page 7). So that service would cost 1.61 EUR. With bitcoin the process would be: Transfer money to BTC-E which is 1% + the payment source fee so we're already over and we haven't even gotten our bitcoin yet. ok lets try another one since that didn't work out and I'm sure we can find cheaper. Kraken is free for SEPA deposits. I can't find any example fees for SEPA transfers from Italy to Germany but lets say 0.10. Trading fee: 0.28 Withdraw fee is in btc(0.00050) so hard to say but currently around 0.31 then there is the bitcoin fee to deposit on the chinese side in okcoin which is another 0.06 then luckily its free to trade at ok coin and only 0.4% to withdraw in CNY which is 0.56 Total cost: 1.31 So assuming no slippage(which there would be since any country receiving a lot of remittances like this would be a buyers market) you can go through 3 extra transfers and save yourself 0.30 EUR on your 140EUR transfer. This also assumes my SEPA fee is right which I think it might be quite low for reality. Italian banks tend to have very high transfer fees even nationally.