But this wasn't the first time I had learnt about cryptocurrencies. During the winter 2010 to 2011, I had studied the technology, having met some of the earliest adopters during heated economic-philosophical discussions of the Occupy Wall Street protests. Although a few Bitcoin users actually joined the protests - most of the protesters were either socialists leftists, economic democrats communists or anarcho-syndicalists - there was a great number of alternative ideas, which could fulfill, if not replace the current global economic system.
Bitcoin was one of them. So far, only Bitcoin has risen to prominence, with maybe the cooperative movement growing as a good complementary method of economic liberation - but cooperatives are people-centric. With Bitcoin, you don't need to trust people with your money, and this is a fundamental change.
I created the idea of a money remittance network on top of a franchise of Bitcoin exchanges to tackle a particular problem. I have a son, Jay. He was born during the winter of 2010, and he lives with his mother Rose, a wonderful lady and a role model, in Kenya. Back then I was broke, and writing this article I still am, but God or Gods willing this should change. I had for a few years consulted cooperative societies in Kenya, with hopes to earn income from revival of the local food industry built in the sixties, but the plans remained unrealistic without the necessary capital, and mobilization of people to work together without an economic incentive remained a fantasy.
My utopian dreams of searching for a model to empower the local farmers' cooperatives in Kenya to become industrial and service cooperatives following the example of the Mondragon Corporation and using renewable energy systems and sustainable architecture to grow as a community - had been foiled for the time being because of conservative attitudes and turf issues. So, I turned to Bitcoin.
We had separated from our relationship with Rose, mostly because I had problems with earning a sufficient income in Kenya to support her and Jay. So I had moved to Finland for the time being. So, I tried from here. For a couple of years with little chances of setting anything up in the lack of the means to an end, money. According to my subjective theory, vast majority of problems in human relationships boil down to money, and we need Bitcoin to overcome that. To be more precise, we need things like Bitcoin to overcome our money-related issues. Everyone should at least, mine @ home.
It emerged that I'm by far not the only one with the same issue. Kenya receives in total $2 billion per year in remittances accounted by money transfer companies, a few money transfer companies, who control the market with exorbitant fees. On average, the fees are about 12%. For smaller sums of money, the fees can climb up to 25%, which is the case in Finland if 50€ or less is sent. This makes sending small sums of money for daily items unbearably expensive. On top of that there's the expenses of going to town to pick the money up. My family stays in Bungoma, behind a 30 kilometre ride on a rather uneven gravel road.
It takes an hour to reach town, even if you have a four wheel drive. Three consecutive governments have promised to tarmac it, without ever bothering to fulfill their claims. So much for the government providing us "Roads". You have to receive the money during office hours, which isn't always possible, because office hours collide with working hours. Rose is a teacher, and teachers work during office hours, so she has to ask for leave just to pick up cash from Western Union. Unpaid leave.
But there was some hope.
Together, money remittance in the entire African continent based on accounted figures represents about $20 billion, and growing steadily. This figure comes from those submitted to taxation by registered money transfer firms, such as Western Union, Moneygram and Expressmoney. On top of that there's mobile money firms, such as Kenya's Safaricom with a whopping $20 billion in annual and steadily growing volume, and other firms engaged in the business: South Africa's MTN, India's Bharti Airtel, and many regional companies. There are even an independent mobile money operator, Zambia's Zoona. I did my research for the viability of the MBTC model in Zambia. I'm thankful to the generosity of the BongoHive incubation laboratory for bearing me and my ideas for a whole two months during the time I stayed in the country. I would like to thank my then-girlfriend, Nina who took me to Zambia, and made the stay worthwhile. Note to ladies: You have to be patient with me.
Safaricom has local fees at 9%. That's almost as high as using Western Union. Safaricom users may only send money within Safaricom's network, which limits the user within Kenya alone. With Airtel Money and MTN Money, one can technically send money abroad, but this is subject to the teleoperator's exchange rates, and fees are a notch higher as well.
It's obvious that this is where Bitcoin comes in.
Bitcoin cuts the money transfer fees. With Bitcoin, one could theoretically send any amount of money. Regardless of where the user comes from, as long as there is a local Bitcoin exchange, where to switch back to the local fiat, if needed.
Kenya's BitPesa tackles this problem. I'm glad that they do, because technically they've managed to solve my problem before I did, and I'm happy about that. At least someone did that. Now I can send money for my family without exorbitant fees. In my case, now Rose can receive the money in her telephone, and only pay Safaricom for cash conversion at the local kiosk. This is a solid improvement.
BitPesa has proven that it is viable to use Bitcoin for money transfer. In the following chapter, I shall document how it works.
In this post, I'm going to lead you through the process of using BitPesa for remittances, based on my experience. I used BitPesa to send 50€ from Jyväskylä, Finland to Bungoma, Kenya.
First step:
How to obtain Bitcoin:
You obviously need a Bitcoin exchange. In Europe, you have plenty of choices. Check the ones that are based in your own country first, and even before that you should see if there's a Bitcoin ATM or an over the counter service nearby. This will save you a lot of time.
In order to get a fast service you need a bank account in the SEPA zone - Western Europe - to use a Bitcoin exchange such as Bittiraha.fi or Bitstamp. Transfers from outside the SEPA zone can take up to a week, and are subject to fees. This can be a problem for foreigners, who stay in the country. If you're a foreigner, you should resort to the most viable option you have in your home country, unless of course, you're near a Bitcoin ATM or if your visa permits opening a local bank account.
Bittiraha.fi bills 5.63% on top of Bitstamp, but that's good enough for their fast and reliable service. I bought my Bitcoins on Friday evening, with 50€, and received 0.1034 Bitcoins on Saturday morning. With Bitstamp, the transfer would have been completed on the following Wednesday. From outside of the SEPA zone the transfer to a Bitcoin exchange based in Western Europe, the transfer would clear probably on Monday the 28th. July, and be subject to fees of on average another 50€, making small transfers less viable. Had I had a Bitcoin ATM or an over the counter service nearby, the transfer could have been instant.
Bittiraha asks you to fill up your name, telephone number, email and Bitcoin wallet and / or Bank account depending on whether you intend to buy or sell Bitcoin. Optional information are residence. No ID is required, although this is usually provided by the bank. In Finland, users of Bitcoin ATM's or payment services do not have to prove their identity in the time of writing this post. In Kenya, they do. Finland classifies Bitcoin as a commodity, while in Kenya and other members of the African Union Bitcoin legally is mobile money. This is where the difference comes from.
Second step:
BitPesa works well for the intended purpose in my opinion.
Currently, you can use BitPesa to send Bitcoin from a Bitcoin wallet to a Safaricom M-Pesa account in Kenya, with a 3% transfer fee.
The website uses an exchange rate denominated in British Pounds. According to XE.com which gives a weighted average forex spot rate, 50€ is about £37. So, I type in £37. This amounts to 0.101 Bitcoins, and with the 3% fee deducted from a British Pound to Kenya Shilling conversion, Rose should receive 5863 Kenya Shillings on her M-Pesa account.
This sounds fantastic! although Rose still has to pay for converting the M-Pesa to cash, she at least now has the money at hand, and the nearest kiosk where the cash can be withdrawn, is almost next door, and open until the evening. This means that she doesn't have to ask for leave from work just to pick up money for groceries, and she can do that conveniently while shopping at the local market, when the need arises. Also, many bills such as the electric bill can be paid via M-Pesa, which makes things easier at her side. This is really good.
But Rose doesn't have Bitcoin. She has Kenya Shillings on an M-Pesa account, which is subject to fees to operate. Also, she can't use BitPesa to send money. She can only receive it. Also, BitPesa currently only works from Bitcoin wallets to Safaricom M-Pesa accounts only. No other countries are served, in the time of writing this post.
BitPesa solves one particular problem, but does it pretty well. The service shows in outstanding clarity that it is viable to use Bitcoin for remittances.
For compliance, BitPesa asks the sender to type in their personal data, with a reservation to verify it in the future. Kenyan law requires that both the sender and recipient of a mobile money transaction are known, with the provision of the service provider being able to verify the records of the identities of both parties to the transaction and the transaction data itself concerning the said parties upon a request from a judicial representative, for six consecutive months. This requirement comes from the African Union convention on cyberspace and cybersecurity. In practice, BitPesa has to keep the names and transactions in a searchable database for six months. The service might be required to verify the identity of the sender in the future upon creation of a user account, but so far they've managed to maintain a more liberal approach. No passport scans are required during the time of writing this post. Safaricom users have identified at a service desk. Mobile money users in Kenya and other African Union member states have to identify for each deposit or withdrawal.
The recipient name, telephone number and email are required. Please remember to ask for the email address of the recipient, if you send money through BitPesa. The confirmation is sent to an email address. The email doesn't affect the transaction, but is a required field in the form.
The transaction takes about ten minutes to clear. This means that the process has been automated. This is another thumbs up for BitPesa. How they do it in practice is up to them to reveal, but as far as I know, there's an API provided by Safaricom's technology partner Vodacom allowing such automatization from the UK, hence the exchange rate from British Pounds.
Rose didn't realize that the money sent to her M-Pesa had come from me until I asked her. It would be nice, if one could SMS a message with the remittance, for example "Merry Christmas".
The plan I wrote in August 2013 has taken a life of it's own. By the time most of you have read this, it has come to reality God or Gods willing. In the following chapter, I shall lead you through the MBTC's money transfer service.
