By Jon Matonis
Forbes
Saturday, May 12, 2012
http://www.forbes.com/sites/jonmatonis/2012/05/12/the-somali-american-remittance-dilemma/
By threatening to close their Wells Fargo
and U.S. Bancorp accounts this week, a group representing Somali
Americans has pushed the ongoing hawala remittance issue to a head. For
months now, Somalis in Minnesota have been barred from making the small
regular transfers to their family members in Somalia that they have been
making for years.
According to American Banker,
“Bank officials say they sympathize with the plight of the expatriates
but that there is no clear way to process the payments comfortably
within federal rules. The problem lies in Somalia’s money-services
businesses. Remittance there is done through a loose network of MSBs
known as hawalas. U.S.-based hawalas work with banks to wire the money
to hawalas in Somalia.” Since hawalas in Somalia are unregulated, the
U.S. government worries that such intermediaries could assist in funding
terrorism.
Unfortunately, it’s not an isolated incident. This scenario is likely to happen more and more as onerous Bank Secrecy and USA Patriot Acts
make it increasingly difficult for financial institutions to be in full
compliance with anti-money laundering regulations. Instead of trying to
comply, they are electing to opt out so as not to encounter heavy
federal fines. It sure would be nice if the world had a decentralized
peer-to-peer digital currency that could be transferred to mobile
devices in a secure fashion.
Wait a minute! Doesn’t bitcoin allow
for rapid and trustworthy international value transfer? Isn’t bitcoin
fairly easy to obtain in the developed economies of North America and
Europe? Doesn’t Somalia have good telecommunications infrastructure
supporting mobile phones?
Here’s how the bitcoin money remittance
process would work. A hard-working honest Somali American wishes to send
the equivalent of $150 to his mother in Somalia so he purchases bitcoin
at one of the many exchanges that accept cash deposits at banks for
bitcoin. Alternatively, our would-be remitter could use the Bitcoin OTC
(over-the-counter) exchange and arrange a person-to-person sale based
on reputation history. Once the bitcoin is stored safely in the
remitter’s client wallet, he would ask the overseas recipient to
generate a bitcoin receiving address using one of the many bitcoin
wallet apps for Android. [Sorry but Apple’s App Store is currently
restricting bitcoin wallet apps with send or receive capability.]
After
his mother in Somalia has received and confirmed the bitcoin
transaction (approximately 10 minutes), she would be able to maintain
the bitcoin balance or change it out into her local currency, the Somali
shilling. Bitcoin exchangers are already springing up in many countries
around the world including Brazil, Latvia, and Philippines. If it
hasn’t happened already, a savvy merchant in Somalia will start
accepting bitcoin for Somali shillings. Or a traditional currency
exchange dealer could get in on the action too — the spreads are
certainly there.
In September 2010, the mobile penetration rate in Somalia was estimated
at 25.84% over a population estimate of 9.9 million. Since the
financial flow would be principally in U.S. dollars to bitcoin to Somali
shillings, several aggregators could make a market in bitcoin and then
sell their bitcoin in the market to other intermediaries. All it takes
is a few Somalia-based bitcoin outlets to open up their economy to the
rest of the world economy.
As a distributed network, bitcoin
possesses the capability to route around interference and disruption. In
fact, this was a key design consideration as resiliency has grown to
become an imperative for privacy-enhancing electronic cash. Its
detractors remind me of the holy papacy being fearful of the printing
press because it allowed for individual interpretation and diminished
mankind’s reliance on the anointed biblical teachers.
