If you held a U.S. money-transmitter license and wanted to use Bitcoin, what international money-transfer business models could you build?
Cryptocurrency
Asked by Question Bot01/Nov/20151 answer
1 Answer
F
Faisal Khan
Answered 01/Nov/2015
The possibility is still singular when you talk of international money transfers: money transfers itself.
If one is licensed as a MSB/MT in all the States in the US, the next challenge would be finding a bank to work with you for cross-border money transfers. Most banks are wary of entering this market (this is especially true of the very large and the very small banks). Limited exposure to International markets is one area and AML/KYC issues on the 2nd half of the transaction is the other (both can and are very easily solved). But its usually an obtuse or myopic view held by someone in the Bank that prevents them from truly going international. Add Bitcoin as the platform and currency to this, and the equation becomes more spicy!
The market size for remittances is over US$500+ Billion. The US still has the lion's share of the market. The issue comes in when the sending and the settlement bank are involved.
For competitive corridors the market is hovers between 2% to 3% (and I'm being generous here). Even if the transaction bank, State side works for a flat fees, the settlement bank will be working for a minimum of 0.5% of the cost of the transaction. So the question now to ask is how much would the MSB/MT holder like to make on this transaction? 0.5%? - if so, we are already at 1.0% of the cost.
Now introduce the agent network and they too would like to do business in the arena of 0.5% to 1.5%. You can see the costs are nearing the prevailing money-transfer fees.
However, all this can still be negotiated and tackled with. The main issue (in my opinion) would still be the liquidity issue on the receiving side. Who is willing to accept lots of Bitcoins and trade them over to US Dollars and pass them on to the Settlement Bank? In almost 99% of the case, the settlement banks will not touch bitcoins or trade with them (in the near foreseeable future, due to regulations), so who is doing the conversion out of Bitcoins on the receiving side?
Crack that problem, in an efficient manner and you have yourself a reliable conduit for cross-border remittances.
If one is licensed as a MSB/MT in all the States in the US, the next challenge would be finding a bank to work with you for cross-border money transfers. Most banks are wary of entering this market (this is especially true of the very large and the very small banks). Limited exposure to International markets is one area and AML/KYC issues on the 2nd half of the transaction is the other (both can and are very easily solved). But its usually an obtuse or myopic view held by someone in the Bank that prevents them from truly going international. Add Bitcoin as the platform and currency to this, and the equation becomes more spicy!
The market size for remittances is over US$500+ Billion. The US still has the lion's share of the market. The issue comes in when the sending and the settlement bank are involved.
For competitive corridors the market is hovers between 2% to 3% (and I'm being generous here). Even if the transaction bank, State side works for a flat fees, the settlement bank will be working for a minimum of 0.5% of the cost of the transaction. So the question now to ask is how much would the MSB/MT holder like to make on this transaction? 0.5%? - if so, we are already at 1.0% of the cost.
Now introduce the agent network and they too would like to do business in the arena of 0.5% to 1.5%. You can see the costs are nearing the prevailing money-transfer fees.
However, all this can still be negotiated and tackled with. The main issue (in my opinion) would still be the liquidity issue on the receiving side. Who is willing to accept lots of Bitcoins and trade them over to US Dollars and pass them on to the Settlement Bank? In almost 99% of the case, the settlement banks will not touch bitcoins or trade with them (in the near foreseeable future, due to regulations), so who is doing the conversion out of Bitcoins on the receiving side?
Crack that problem, in an efficient manner and you have yourself a reliable conduit for cross-border remittances.