It seems that bitcoin, while speeding up cross-border money transfers, still cannot make them cheaper because of the bulk of the expenses situated “at the first and the last miles of the transfer.”

Bitcoin enthusiasts are accustomed to believe that the virtual currency bitcoin is a magical solution for remittances: it makes them cheap and fast. However, it seems that the situation is much more complicated. In a blog post published on 6 October, Luis Buenaventure, formerly co-founder and one of the directors of Rebit.ph, which he characterises as “one of the most successful examples” of a bitcoin remittance company, argues that bitcoin does not actually make remittances cheaper.

According to Buenaventure, the cross-border transfer itself is not really expensive for big companies such as Western Union or Moneygram. It costs much more to receive cash from the sender and to pay it to the recipient. And, though bitcoin allows people to circumvent the SWIFT, a bitcoin-powered remittance basically follows the same pattern as the traditional one and cannot really be cheaper.

To check the information, Bitcoin Magazine contacted four other bitcoin remittance companies: Bitex, HelloBit, SatoshiTango and Volabit. They mostly agreed with the Buenaventure’s point. According to Ali Goss of HelloBit, bitcoin even makes things worse, because using bitcoin means adding a third currency. The other problem, according to Hannah Kim of Volabit, is the ambiguous status of bitcoin in many countries, which makes it difficult for bitcoin companies to form partnerships with cash-collecting and distributing networks.

However, according to Buenaventure, there is a solution. If the money converted in cash but in a local virtual currency such as mobile money, it can reduce remittance costs. Currently, he argues, only two countries in the world possess successful mobile money systems: Kenya with M-Pesa and Zimbabwe with EcoCash. But everything can change in the near future.

Alexey Tereshchenko