Because Blockchain does not really help speed up remittances


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In addition to untraceable purchases of drugs and firearms, one of the great promises made by blockchain evangelists are cheaper and easier remittances.

As often happens with the blockchain, advertising has come before the real case of use, Khalid Fellahi, who is responsible for the digital business of Western Union says that of Barron. The company's customers can initiate full digital remittances in around 45 countries, says Fellahi. Its activity of completely reduced digital remittances grew by 20% per quarter.

"We are a company that provides what we call the first mile, the last mile and anything that happens in the middle to make an effective, safe and fast money transfer," he says. "This is what Western Union was built to do".

The question then is what blockchain, or bitcoin in particular, can do to make any of those three segments of the journey of money from the developed world to the one developing faster, safer or cheaper. Fellahi's answer is that for now, not much.

In the middle, there is the Western Union settlement system that operates through 135 currencies but also, crucially, ensures that the sending and receiving entities are well-known entities and in compliance with anti-money laundering and other measures. "We make sure that these transactions are safe, that we know who is transacting and we understand their behavior," says Fellahi. "It seems simple … but it's really a lot."

Cryptocurrency, seen as a currency, does not really help in this process. There is no real benefit globally in transferring a currency into bitcoins, and then moving bitcoins into a second currency. And indeed, there are huge problems of volatility and complexity to manage.

And the cryptocurrency does not help with that first mile and the last mile of a shed: get money from a customer in a system that can send it abroad. "There is no universal connectivity for all institutions or [remittance] resellers of this ecosystem," he says. The key problem is that "there is not enough demand, typically on the one hand" of a remittance to make a bitcoin-destination-currency transaction make sense.

When that transaction is appropriate, it is important to remember what problem has been solved: currency exchange. This, of course, is one of the problems that any remittance system has to solve, but it is not clear why a horribly volatile and poorly adopted technology should be the solution to solve this problem. "Can I actually beat the market [exchange] using cryptocurrencies to switch from one pesos to a dollar?" Even if you could, "you still have to get the money somewhere and you have to get it out to the customer [the]." This means that retail branches around the world, mature compliance systems and many people already using the network.

Remittances concern the exchange of currency and the delivery of currency. It is not clear why blockchain is necessarily better for both.

Other links!

Funding Circle intends to become public. "Talking about how algorithms make risk managers better than human or experienced institutions is still meaningless given how good the current cycle is," observes Bloomberg.

And it's not just the Funding Circle that looks at the IPO. Quartz points out that seven fintech companies "have announced or completed initial public bids (IPOs) this year, at the rate of setting an annual record."

A year ago, Equifax was violated. Two US agencies are not saying what the company did in response to the loss of 140 million personal data from Americans, reports the New York Post.

The story of Goldman Sachs abandoning the plans to trade bitcoins is "false news," said CFO Marty Chavez. Previously, a company spokesman provided Barron with a more measured denial of denial.

Write to Ben Walsh at [email protected]

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