Many people believe global remittance will be Bitcoin’s killer application. This week Bitcoin.com spoke with Luis Buenaventura, remittance expert and Chief Technology Officer at Bloom Solutions, concerning using Bitcoin within the remittance market. We discuss Bitcoin’s possibilities within the billion dollar remittance industry and the recent regulations in the Philippines.
Remittances & Bitcoin
Buenaventura has studied the subject of utilizing Bitcoin with remittances extensively and has written a book called “Reinventing Remittances with Bitcoin” on his research collected since 2014.
Bitcoin.com (BC): So how did you originally get involved with Bitcoin and remittance services?
Luis Buenaventura (LB): I’ve been building tech startups in the Philippines for over a decade now, and one of my earlier companies was an ecommerce marketplace that failed because there wasn’t enough local credit card usage to make the business model work. Bitcoin seemed like an interesting alternative payment mechanism at the time, and although I still believe that it could be the case, I’m a little more realistic about how long it might take for people to really get into it.
Eventually, it became apparent that Bitcoin’s strongest use case was probably remittances – at least in countries like the Philippines – and I’ve been focusing on that exclusively since 2014.
BC: When did you begin to heavily research the subject of Bitcoin remittance strategies and global startups?
The remittance problem has been the core focus of the last three years for me, and naturally, a lot of my knowledge has come from interacting with other startups and founders who are working in the same space. The amount of knowledge and data I’ve collected is very much the sum of the work of many others.
BC: In your book “Reinventing Remittances with Bitcoin” you say a small Bitcoin startup will not be able to overthrow current remittance incumbents at this stage. Can you tell our readers why this is the case?
There are a lot of factors here, but I think the biggest is that trust takes a long time to build. Acquiring customers from different cultures and different languages is not straightforward, and apart from the Korea/Philippines corridor, I’ve not seen many other examples with great traction. I should emphasize that I’m not saying it will never happen, but it will take a lot more time and resources than many young startups currently have access to.
BC: What is a “last mile” remittance service?
Bitcoin remittance startups can be classified into a few distinct types: first mile, last mile, or end-to-end. First mile remittance services focus on acquiring customers in the sending countries, but don’t actually have any presence in the receiving countries. They rely on other businesses – the last mile startups – who handle the actual disbursement and support the beneficiary customers on that end of the transaction.
Then there are the end-to-end services which manage both sides of the transaction. That’s a much more challenging model to pull off because you’re learning how to acquire customers on one end, while struggling against the nuances of an under-developed banking infrastructure on the other.
BC: At this stage how do you think governments and regulators are handling Bitcoin remittance services?
In the Philippines, it’s now obvious that the government views Bitcoin primarily as a cross-border value transfer mechanism, based on how they’ve written their recent legislation. I suppose you could say that the People’s Bank of China has similar views, although they’ve chosen to focus on capital flight instead of its positive impact on migrant worker remittances the way we have. Because of this, they’ve taken extra aggressive steps to try to curb some of Bitcoin’s capabilities.
I can’t speak for other countries, but here in Manila, at least, I think that getting the conversation started was an important first step. Now it’s on the local Bitcoin community to make sure that the tone stays friendly and that we keep customer benefits and security at the center of the discussion.
BC: What did you think when Western Union invested in the Digital Currency Group?
Well, it certainly makes sense, and I’m sure they viewed it as a hedge to ensure they always had a close eye on the industry. Having met VPs from Western Union, Moneygram, and RIA, I can say that they’re all aware of Bitcoin and blockchain technology, and are obviously not going to stand by idly and wait for their whole industry’s demise. The question really is, how will they adapt to the new possibilities that Bitcoin opens up? That’s still unclear.
BC: What is the Bloom Network?
The Bloom network is a loosely-coupled network of blockchain-based partners that we work with around the world to form our various remittance corridors.
BC: Can you explain why you believe Bitcoin is terrible at the moment as a currency but good for settlement?
Bitcoin is good for two things at the moment: long-term speculation and instant settlement. Unfortunately, volatility is a by-product of price discovery, so it’s difficult for people to use it for their daily expenses. However, because it’s relatively quick to send bitcoin from one wallet to another, it means we can use it to settle debts in real-time. The catch is that the receiving party needs to be able to liquidate it for fiat currency fairly quickly as well, in order to avoid potential volatility pitfalls.
BC: Can you tell our readers why price trends don’t affect Bitcoin remittance startups?
The instant-settlement, instant-liquidation workflow that’s described in the book avoids volatility risk by never taking a long bitcoin position. In theory, a rising or falling bitcoin price should have little effect on a Bitcoin remittance startup as they don’t hold the cryptocurrency for a long enough period of time.
BC: In your opinion how long do you think it will take for Bitcoin to make a dent in the global remittance market?
It’s tough to say. There’s a version of our future where people will just bypass remittance companies completely and go peer-to-peer via Bitcoin, and I think that’s the future anticipated by the Philippines’ new guidelines.
The other possibility is that we’ll continue to rely on remittance companies in some form (whether physical or digital) to act as on- or off-ramps, but those transactions will be settled in the background via the blockchain. I tend to believe that this is the more likely of the two scenarios, because the migrant workers who traditionally benefit the most from cost savings are also the ones who are least likely to trust a virtual form of money with no government backing it.
The latter scenario is where we’re at right now, and if it continues at this pace, there’s no reason not to expect a few hundred million USD being settled through the Bitcoin blockchain annually, within the next two years. That’s still less than 1% of the world’s remittance market, but hey, we gotta start somewhere.
Images courtesy of Shutterstock, and Luis Buenaventura.