At the eighth annual Western Union Consumer Protection & Compliance Conference held September 18th, 2013, Jay Postma, CAMS, President, MSB Compliance Inc.and Scott Apodaca, CAMS, Senior Manager, Western Union gave a presentation entitled “Emerging Risk of Digital Currency (E-Currency / Bitcoin / Liberty Reserve).

The conference was billed as the go-to place to “Stay up-to-date and learn about the latest consumer protection efforts, regulations, enforcement trends and strategies used to detect and combat fraud, terrorist financing and money laundering.”

Conference registration was free to Western Union Agents and employees. Individual conference registration was open to consultants, vendors, exhibitors and others for an additional fee.

Legacy Banking and Bitcoin Mingle

Some might be surprised to learn that a member of the Bitcoin Foundation presented at this conference. As it happens, Jay Postma, co-author of the subject presentation is an individual member of the Foundation. Moreover, as mentioned, his co-presenter, Scott Apodaca is a representative of Western Union.

However, the comingling of old and new should come to no surprise to those that have been following Roger Ver the “Bitcoin Jesus,” Jon Matonis, Executive Director of the Bitcoin Foundation and the open nature of the Bitcoin Foundation in general.

Earlier this month Ver posted a popular photo on Twitter of the Director of Products for Western Union wearing a Bitcoin button in front of the BitPay booth at the Money2020 Emerging Payments & Financial Services conference. Western Union was founded in 1851.

Earlier this year, Jon Matonis was invited to talk at SWIFT or the Society for Worldwide Interbank Financial Telecommunication, the “global provider of secure financial messaging services.”

John described the experience in his Forbes article “Bitcoin Comes To SWIFT.”

“The undeniable march of Bitcoin definitely left an impression on SWIFT, however Bitcoin as a network is an existential threat. Bitcoin as a non-political, non-corporate unit of account is not.”

Swift has also been blogging about bitcoin on Dialogue, the “Voice of The SWIFT Community.” SWIFT was founded in 1973.

The Bitcoin Foundation’s mission is to “help people exchange resources and ideas more freely” to standardize, protect and promote Bitcoin, appears to allow anyone to join as a member and receive voting rights. The Bitcoin Foundation was founded in 2012.

Not Ready For Primetime?

A slide from Emerging Risk of Digital Currency presentation asks if Bitcoin is ready for International Money Transfer and concludes “NO” for the following reasons:

Worldwide use of bitcoin is growing but there is not sufficient use and liquidity yet for massive adoption

Also, consumer interfaces to bitcoin are not sufficiently mature yet ease of use, clarity of transactions, taxation issues, etc.

And…many regulatory issues are yet to be adequately addressed

It is also explicitly stated in one of the slides that:

“Western Union does not have commercial relationships with Digital Currency companies or providers who buy, sell or trade in digital currencies and will also prohibit consumers from using Western Union services if it is determined transactions are associated with E-Currency.”

The World Bank Weighs In

Earlier this month, The World Bank had a press release: “Migrants from developing countries to send home $414 billion in earnings in 2013.” It highlighted that:

– Developing world to receive $414 billion in remittances in 2013.

– Remittances to India, China will total $131 billion.

–Cost of remitting money remains high.

“Cost of remitting money remains high.”

The cost will remain high if The World Bank does not have serious discussion on the merits of Bitcoin. Maybe they just need to mingle more?

Stefan Molyneux, host of the Freedomain Radio recently had a fantastic Youtube video “The Truth About Bitcoin” and explained (at 4 minutes 40 seconds) how “Recently, someone transferred 6.5m in BTC for a fee of 6 cents (0.0000009 fee)” and further compared what those fees would be using legacy financial institutions. However, he didn’t include a comparison to Western Union. Western Union doesn’t appear to make its fees for transfers of more than $2,000 transparent on its website. In any case, it cost about $8 or .8 (less than one percent) to send $1,000 to Argentina from New York City for “money in minutes transfer” and it also costs $8 for a 3 day transfer and $68 or 6.8 for a similar “money in minutes” transfer to Cyprus. I tried to use the same link to move the money in reverse but it appears that there is only an option (at least on the web) to move money from Canada and the United States to another destination. To be fair, I haven’t done an in depth analysis of Western Union’s services (and haven’t personally used their services).

Yet there is nary a mention of Bitcoin in the World Bank Website… well there are some comments left at CGAP or the Consultative Group to Assist the Poor. CGAP is “housed” at the World Bank and apparently the World Bank scrapes its website for inclusion in their search engine. CGAP works toward a “world in which everyone has access to the financial services they need to improve their lives.” One comment apparently left by an employee of Coinlab last August under a post on “What Do International Remittances Mean for Mobile Money?:”

“I am curious what you think about Bitcoin for international remittances. It seems like it gets around some of the barriers listed above. Bitcoin is less exposed to regulatory hurdles because there is no individual centralized entity which controls it. Operationally, it is a breeze compared to starting an international money transfer business: anyone with an internet connection can start using the protocol to transfer value from anywhere to anywhere in the world in minutes for free. If you’d like to learn more about Bitcoin, drop us a line to info [at] coinlab.com . We have no official connection to the protocol, we are just building services off of it…”

Oh, and there is Michael Klein’s paper at the World Bank earlier this year, “The Next 30 Years: What future for finance?” where he stated that “Volatility and disarray…paved the way for disruptive business models in finance” where “Encrypted, distributed peer-to-peer networks such as the old Bitcoin of 2009 provided real alternatives…” and snarkily added:

“In 2037 the annual Nakamoto conference in honor of the pseudonymous inventor of bitcoin honored the 90th birthday of Ian Angell Professor Emeritus of the London School of Economics. Ian’s vision of a future with private “off-planet banking” at last seems to become reality…”

Michael Klein worked at the World Bank for more than twenty-five years, most recently as Vice President for Financial and Private Sector Development for the World Bank Group as well as Chief Economist, International Finance Corporation and apparently is still a blogger for the Bank.

Western Union Flirting with Bitcoin

Back in April the was an article from Fox Business News (that has curiously disappeared) entitled “Bitcoin Buzz Draws Western Union and MoneyGram.” As always, Reddit was there and Reddit user Cowboy_Coder had the following comment which received the most votes:

“If they move early, Western Union could establish themselves as the defacto method of exchanging cash to and from bitcoins, all around the world. If they hesitate and wait too long, they will find themselves irrelevant and obsolete. Make the smart decision WU.”

Michael Terpin co-founder of BitAngels recently had a guest post on VentureBeat “Bitcoin’s road from perdition: What will hurt and help the controversial digital currency:”

“A fully licensed, established money transmitter adopting Bitcoin: Be it eBay’s PayPal (oh, the irony), Western Union or Moneygram (who briefly worked with ZipZap and, by extension, BitInstant), a fully licensed mainstream transmitter with a track record of compliance in both AML (anti money laundering) and KYC (know your customer) regulations would undoubtedly lead to a new wave of usage among heretofore tenuous early adopters, both on the consumer and merchant side.”

Doing the Dance

It is fascinating watching legacy banking and Bitcoiners do this dance. Right now each partner is learning the next move from one another. Neither have the lead in this dance. We have a lot to learn from one one another during these exciting times. Bitcoin has been called frictionless… its also a financial lubricant. Bitcoin may not be “ready for primetime” but something tells me Western Union is getting ready. Get ready to mingle!