A short note on cryptocurrency approaches to “The Remittance Problem”, which is one of the problems that crypto is supposed to be great for, but has yet to be seen.
One of the key problems is how to prevent a remittance system from becoming a money laundering channel. Existing laws have very strict controls on cross border transfers, and the conventional banking sector implements these “know your customer” laws.
So, if we want to use unaccountable cryptocurrency transfers in this role, what should be done? How can we make a remittance system that is safe for the target users (poor workers and families), and not overrun by mafias and cowboy financiers?
Coindesk juxtaposes two alternative approaches to this challenge, which gives us perspective.
Stan Higgins reports on recent developments from Ripple Labs, who are establishing a network of legal and reputable organizations, connected by their cryptocurrency enabled infrastructure. When you use Ripple, you know that they have vetted their partners, and the nodes of the net take responsibility for the legality and safety of their business
Right next to this item, Daniel Cawrey reports on “How HelloBit Plans to Become the Uber for Global Remittance”. With a deliberate reference to Uber, it is clear that HelloBit isn’t interested in conventional commercial “reputation”. It is an accurate analogy, however because their strategy is exactly Uber’s: offload liability to others. HelloBit
“leaves the complications of the exchange business to local operators. “We’re just matching the two people for a transaction,” Goss said.”
That sentence may make sense to cryptoenthusiasts, but is it not really a correct interpretation of current money laundering laws?
Like Uber, HelloBit intends to compete on price, presumably intending to undercut Ripple as well as conventional services. Definitely a “disruptive” approach, if not particularly “innovative”.
It will be interesting to see how these play out.
Theoretically, they could end up converging to the same thing, since local institutions could support both HelloBit and Ripple. However, what will really matter is the customer interface and experience. So it all may be down to what the best mobile app is in a given area, and who can connect the people who want to connect.