by Joseph Young
Massachusetts-based private research institution Boston University’s Center for Finance, Law and Policy hosted a panel of financial and bitcoin experts to discuss digital currency as alternatives to traditional remittance systems.
The seminar panel called “Digital Currencies and Remittances: Innovation, Regulation and Development” joined by Bitcoin Foundation’s Regulatory Affairs Committee Chairman Marco Santori, American Banker blockchain journalist and Community Director of the Counterparty Foundation Chris DeRose, and John Beccia from Circle Inc. explored the issues of conventional remittance systems and their limitations as convenient and secure financial services.
The panel and the Center for Finance, Law and Policy carefully examined the decentralized and transparent nature of the bitcoin network and investigated its potential as a cost-efficient and secure remittance system.
According to the university’s research entitled “Remittance Flows to Post-Conflict States: Perspectives on Human Security and Development,” informal remittance transfer fees in developing and severely underbanked countries such as Afghanistan accounted for around two to five percent of each transaction, which often take over 24 hours to be processed.
“Informal remittance transfer fees were recently estimated in the two to five percent range (Slota 2012). Maimbo (2003) has reported six to 12 hours as an average delivery time for hawala remittances in Afghanistan; various other sources suggest 24 to 48 hours as a maximum delivery time for international transfers in remote rural areas,” read a section of the research.
The panelists and researchers discussed about bitcoin’s capability of creating a more transparent remittance network, allowing senders and receivers to track their payments on a public ledger, thus eliminating the possibility of money laundering and fraud.
“The panel discussed the role of ‘smart’ regulation in such technological innovation initiatives and explored its contributions to enhancing the transparency of remittance transfers and combating money laundering,” announced the university.
Informal remittances are the foundation of most developing economies, as it allows the masses to send payments cheaply, without demanding the amount of requirements asked by established financial institutions and banks.
However, due to the lack of financial insurance, the loss of funds or payments on the network is often endured by the customers.
“The main advantages of informal value transfers as compared to more formal mechanisms like licensed money transfer operators (MTOs), banks, and post offices include cheaper delivery services and greater geographical reach, particularly in remote areas and among unbanked populations,” the research paper stated.
Bitcoin as a decentralized and peer to peer payment network could revolutionize both informal and regulated remittance systems. Leading educational institutions and financial organizations are looking into the possibility of integrating bitcoin into traditional remittance systems and networks.