Bitcoin & Remittances: a Match Made in Heaven

I recently penned this little piece for my economics class, and I thought it might be cool (in a great, nerdy sort of way) to share– especially given the fact that my campo mom, who receives money each month from her son in the States, and I discussed the topic over our beans and rice this weekend.  Did I mention that I love studying abroad?


We live in a world that is consistently being revolutionized by travel and technology. Our 21st century eyes have seen many gloriously new things, but we also cannot help but notice the suffering that still exists in this world and the tug on our hearts to do something about it. What many don’t realize is that this is a fundamentally economic concern as well. We ought to harness our latest technology, the mobile payment systems and cryptocurrencies, to help alleviate our most ancient problem, world poverty, through remittances. Remittances are the funds sent home by migrant workers and they currently are entangled by many restrictions. In this article, I will illustrate the current problems regarding remittances, how remittances and bitcoin (the most popular cryptocurrency) make a great pair, and why everyone should care.

Perhaps your civic-minded friend emailed you the link to Dilip Ratha’s TED talk or very possibly you know someone who sends money home each month, but hopefully by now it is self-explanatory to extoll the virtues of remittances. They alleviate poverty and allow the receivers to stimulate their local economies most effectively—thus providing a mutually beneficial exchange that traditional foreign aid never could replicate. So what are the two major obstacles currently facing this system? The first is the exorbitant fees charged for sending and receiving the money. Remittances are a huge financial market, totaling up to $414 billion in the last year, and The World Bank confirms that, “cutting prices by at least 5 percentage points can save up to $16 billion a year.” That is an extra $16 billion in the households who need it the most, spending and investing it in the economies that need it the most. I believe that it is high time for developed countries to realize that we can best assist developing countries simply by harnessing the power of remittances and removing the current barriers that prevent impoverished families from receiving the hard earned money of their relatives. This is where bitcoin, the digital currency that lends itself to an innovative payment network, comes in. Ken Miller, the COO of Gem and advisor to Square, defends bitcoin in an article published earlier this year, “Given the inherent near-zero cost of bitcoin, if it never had any other application in the world other than to eliminate these double-digit fees and get most of that $5 billion in the hands of people whose lives would be dramatically improved, then that’s a problem worth eradicating with this solution.”

Frustratingly, the second hurdle is regulatory compliance. Start-ups are itching to revolutionize the expansive remittance market by marrying it with cryptocurrencies and mobile payments, but as recent article from CoinDesk notes, “Obtaining a license in the US is the single largest barrier to entry into the remittance industry and explains, at least partially, why there has been so little innovation in the space. BitPesa tellingly opts to avoid the issue altogether and doesn’t accept customers from the US at all.” BitPesa, one of the many recognized bitcoin remittance services, is forced to leave the US (by far the largest sender of remittances) out of the picture. Innovators can only go so far, now it is up to the countries to cooperate in easing the flow of remittances.

Why should everyone care? Aside from the human desire to help our neighbors, the answer comes down to simple economics. We ought to encourage remittances in developing foreign nations because they create wealth and generate trade, thus growing the economic pie. Through increased trade and competition, everyone is ultimately better off. Not only that, but it is clear from innovative companies—think Square, Apple Pay, and even Snapchat—that the mobile payment revolution is happening around us. It is time that we recognize and harness its potential for doing good in developing nations. As consumers, producers, and compassionate human beings, it makes sense for us to throw our weight behind the union of remittances and bitcoin. Let’s do our civic duty by exerting pressure on our governments to cooperate.