Sending bitcoin to people in distressed economies, countries

[joecascio]

I didn't know quite what to search for, so I apologize if this subject is a duplication. If so, please suggest appropriate search terms? Thanks!

I'm curious if anyone has experience or information about sending money to people in distressed or underdeveloped countries using bitcoin.

I have a couple of friends who have done charity work in such places. One worked in Cameroon and the other in Haiti. A common problem in such underdeveloped or war-torn locales is corruption and outright thievery. While honest people in these areas would benefit from money sent from friends, relatives or charity organizations in other countries, there is a problem with simply getting the money to the right person without some or all of it disappearing in transit.

So bitcoin came to mind as what might be the ideal solution to such a problem because a person anywhere in the world could send coins directly to the recipient without having to trust any middlemen. And since even the most destitute of countries seem to have mobile phone service, a "feature phone" bitcoin client could provide the means to receive and use the coins.

In fact, one could see bitcoin becoming the currency of choice in such areas due to its relative stability and safety compared to local currencies.

Any info or thoughts on this?

Thanks.

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[jojo69]

for Africa google M-pesa

there really should be a bitcoin to M-pesa service but I have not heard of one yet

[Stephen Gornick]

So bitcoin came to mind as what might be the ideal solution to such a problem because a person anywhere in the world could send coins directly to the recipient without having to trust any middlemen. And since even the most destitute of countries seem to have mobile phone service, a "feature phone" bitcoin client could provide the means to receive and use the coins.

Until Bitcoin gains traction as money where it is recognized and accepted widely enough to function as a currency the recipient might instead still be better off with a money transfer or hawala even with exorbitant fees.   

That's why Bitcoin adoption needs to start catching on before the crisis. 

The way for that to happen is for there to emerge money changers who will act as the money transfer agent.  This is how M-PESA grew -- agents become M-PESA agents because they were earning commissions, sometimes better than they were earning from their other work.

These agents simply can work independently.   

So here's the scenario I envision. 

1.) An individual receives a text notifying that bitcoins were added to the mobile phone's (hosted) E-wallet.
2.) Individual coordinates with the Bitcoin agent to arrange a meeting time and place (.e.g, cybercafe, hotel lobby or other public place -- for safety) of both.
3.) Individual sends a text to spend bitcoins to the Bitcoin agent's address (e.g., "send 1.23 btc to 50922345678"  )   50922345678 being the Bitcoin agen'ts phone#
4.) Bitcoin agent hands over the cash

Coinapult can do this ... it works in the U.S. and Canada now. They were waiting on their text messaging backend (Twilio) to expand their global footprint I believe.

The problems with that are if this type of exchanged is not welcomed (and we know it likely is not) then SMS transactions are not secure (sent in clear text across mobile network.)   So at a minimum, the transfer from the individual to the Bitcoin agent should be not be traceable.  So I figure the send message basically just gives a PIN code that the individual then shows to the Bitcoin agent who then has a method to retrieve via SMS, using that PIN.

The next problem is where the individual Bitcoin agents then also need to convert the bitcoins that were received in order to restock the cash supply (and to unload the exchange rate risk exposure.  So either other Bitcoin agents nearby might trade with each other for a small fee and eventually a larger agent ends up with a number of coins and then either trades them with local investors or transacts such that the cash stock gets replenished in a timely manner.

So that's one idea as to how Bitcoin will emerge in these areas.   Basically anywhere there are tourists as well as tourists arriving might want to buy local currency with bitcoins and then sell their levftover fiat before leaving and get bitcoins for the trip back home.   These areas are hotels, B&Bs, cybercafe's,  dining establishments even.

[lebing]

Until Bitcoin gains traction as money where it is recognized and accepted widely enough to function as a currency the recipient might instead still be better off with a money transfer or hawala even with exorbitant fees.   

That's why Bitcoin adoption needs to start catching on before the crisis. 

The way for that to happen is for there to emerge money changers who will act as the money transfer agent.  This is how M-PESA grew -- agents become M-PESA agents because they were earning commissions, sometimes better than they were earning from their other work.

These agents simply can work independently.   

So here's the scenario I envision. 

1.) An individual receives a text notifying that bitcoins were added to the mobile phone's (hosted) E-wallet.
2.) Individual coordinates with the Bitcoin agent to arrange a meeting time and place (.e.g, cybercafe, hotel lobby or other public place -- for safety) of both.
3.) Individual sends a text to spend bitcoins to the Bitcoin agent's address (e.g., "send 1.23 btc to 50922345678"  )   50922345678 being the Bitcoin agen'ts phone#
4.) Bitcoin agent hands over the cash

Coinapult can do this ... it works in the U.S. and Canada now. They were waiting on their text messaging backend (Twilio) to expand their global footprint I believe.

The problems with that are if this type of exchanged is not welcomed (and we know it likely is not) then SMS transactions are not secure (sent in clear text across mobile network.)   So at a minimum, the transfer from the individual to the Bitcoin agent should be not be traceable.  So I figure the send message basically just gives a PIN code that the individual then shows to the Bitcoin agent who then has a method to retrieve via SMS, using that PIN.

The next problem is where the individual Bitcoin agents then also need to convert the bitcoins that were received in order to restock the cash supply (and to unload the exchange rate risk exposure.  So either other Bitcoin agents nearby might trade with each other for a small fee and eventually a larger agent ends up with a number of coins and then either trades them with local investors or transacts such that the cash stock gets replenished in a timely manner.

So that's one idea as to how Bitcoin will emerge in these areas.   Basically anywhere there are tourists as well as tourists arriving might want to buy local currency with bitcoins and then sell their levftover fiat before leaving and get bitcoins for the trip back home.   These areas are hotels, B&Bs, cybercafe's,  dining establishments even.

Thanks for this wonderful reply Stephen. It's obvious you have given this alot of thought. I am finding myself more and more thinking about this situation as well and finding that developing markets could be the catalyst which both creates a worldwide monetary revolution and spikes the bitcoin price to the stratosphere. I've been noodling on different methods of achieving this and it seems to me that the largest hurdle is the political/ regulatory one. It seems one of the major contributing factors for M-Pesa was because the regulators were willing to look the other way (after a significant payoff no doubt). I'm wondering if there is any possibility of getting around this, while still utilizing this for trade with retailers.

[Stephen Gornick]

the largest hurdle is the political/ regulatory one. It seems one of the major contributing factors for M-Pesa was because the regulators were willing to look the other way (after a significant payoff no doubt). I'm wondering if there is any possibility of getting around this, while still utilizing this for trade with retailers.

There was just a good summary for outsiders posted:

M-PESA slipped past financial regulators and banks, who seemed to think little of the service, and by the time it took off, its market position was sufficiently strong that it could avoid the onerous regulation requirements under which banks fall.

That's where Bitcoin is today.

Other telecoms have replicated M-PESA’s technology, but they’ve yet to replicate its agent network. Load-balancing cash requirements seems to be the hardest piece. (Cash tends to flow from urban to rural areas.)

With bitcoin there would the be the same type of cash management issues.  But the difference is one M-PESA agent isn't going to trade cash with another M-PESA agent because there is no way for them to avoid the payment network fees, (the agent does earn a commission but that is a fraction of the fees).

But with Bitcoin, the fee is a trivial amount.  So the agents at the edge (rural areas) are likely going to be the ones with extra bitcoins and they simply need to find a trade with an agent in the middle that then needs coins to sell to customers in the urban areas or to other traders (local or globally).


Also, something that is interesting:

Local entrepreneurs who double as M-PESA agents do so not for margin from the service but to drive foot traffic into their stores.

 - http://www.christinacacioppo.com/blog/blog/2012/10/14/notes-on-m-pesa/