How Bitcoin can transform the developing world

undevelopedworldbitcoin03 July 2014 / Telegraph – Bitcoin, the decentralised crypto-currency, is slowly shaking off the lingering whiff of criminality. Its association with (especially) online drugs markets like the Silk Road and radical anarchists is only half the story, and probably the least interesting half, of what Bitcoin can do. Many people within the Bitcoin community are motivated by bolder ideas than scoring drugs off the net. Some of them think the currency can transform the prospects for developing countries too.

Payments from foreign workers to their home countries – known as international remittances – are worth $600 billion a year worldwide, possibly more. They dwarf overseas development assistance, and are vital for millions of people in developing countries. But as it stands, there is no way of getting money from Europe to Africa quickly and cheaply. Most people use a Swift bank transfers or the wire, and that’s extremely pricey and time consuming. On average, to move $100 from London to Africa will cost you $13. This is all an enormous waste of money, and by consequence, a human tragedy.

This is where BitPesa comes in. It’s a remittance vehicle pegged to Bitcoin that was launched last month. As I’ve argued here, one of the great advantages of Bitcoin is that it allows a user to transfer money to anyone, anywhere, for free. That includes, of course, remittances. BitPesa (Pesa is Swahili for money) works like this: people send Bitcoins to BitPesa, which converts them into the local currency, and sends them along directly to the mobile phone of the recipient, who can use it to pay directly for a growing number of products, or cash it out. Kenya, where BitPesa is currently operating, is a world leader in mobile payment: “MPesa” is used by around half of all Kenyans. According to Amy Ludlum, BitPesa’s Head of Trading and Risk Management who was presenting the new venture to the Centre for the Study of Financial Innovation yesterday, sending remittances into Kenya with BitPesa will cost 3 per cent. At the moment, the average is 9 per cent. If that scales up, it’s worth millions of dollars. What’s more, with BitPesa, you can send tiny amounts at a time – so weekly, even daily, peer-to-peer remittances would be possible…… Read more

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