As I was driving through the hills of San Francisco last Tuesday with the latest podcast from NPR’s Marketplace playing on my stereo, I heard an interesting quote that caught my attention:

“Banks have decided to exit relationships in high-risk jurisdictions. It’s just not worth it to them. The benefit certainly doesn’t meet the risk.”

The quote was by bank consultant Dennis Lormel, who was referring to banks in countries like the United States and Great Britain that had stopped doing business with Somalia a month earlier. The banks had cut business ties because they considered Somalia a country with inherently higher risk of financial crimes such as money laundering and terrorism financing.

For the past 20 years, Somalia has been known to the rest of the world as a failed state. There isn’t much of an economy, corruption and famine have devastated the country, and hardly anyone can remember any good news that has come from the country. Despite this fact, Somalia and several other high-risk countries have been able to strive. How has that been possible?

Through remittances.

A large part of Somalia’s economy has been supported by emigrants who send money back home to their families and friends. In fact, 35% of the country’s GDP is directly attributed to remittances and more than 40% of the population relies on money sent from abroad for their basic needs. Clearly, international remittance is a key component of the country’s livelihood. When famine swept the nation in 2010 and took an estimated 260,000 lives over the next two years, the toll could have been much higher without the aid provided through remittances.

So is it safe to assume that everyone in Somalia is a terrorist or criminal, justifying cutting off the ability to send money to the people? Absolutely not.

Now that the last US bank has stopped facilitating transfers to Somalia, thousands of Somalis are hand-carrying wads of cash across borders and sending money via non-armored vehicles. These methods of transferring money have become extremely dangerous and are a clear avenue to corruption and conflict.

Let Bitcoin be the answer for Somalia.

There is no need for banking intermediaries.

Global remittance is where Bitcoin shines. Traditional banking institutions charge high fees and can stop transfers at any time, but bitcoin enables nearly-instant transfers anywhere in the world for a few cents’ fee. Compare that to banks and remittance services that charge 5–25% transaction fees and take up to 7 days — that is, until they decide to stop servicing your country.

Somalians can become their own bank. Bitcoin can provide financial services to the masses.

Bitcoin gives people complete control of their money. Every person can become his or her own money transfer agent. Users can utilize Bitcoin for remittances as well as everyday purchases, and carry their money digitally instead of travelling with large amounts of cash. Anyone with mobile access can gain full banking capabilities through a mobile bitcoin wallet. With 54% mobile phone penetration rate, more than half the people in Somalia already have the ability to become their own banks.

In Sum

“High-risk” countries like Somalia have a chance to be on the bleeding edge for mass Bitcoin adoption. Bitcoin has the opportunity to showcase its potential because people in these countries need a reliable and cost-effective way to transfer money. For many families that have no other option than to resort to illegal workarounds to send money back home, the question is simple…

Break the law, or use Bitcoin?

Yanni

Co-founder of Snapcard, an online bitcoin wallet and bitcoin payment processor.