Topic: BitCoin == Hawala (Read 3314 times)

Jon Matonis wrote a good description of hawala on his blog back in the day:

http://themonetaryfuture.blogspot.com/2009/08/hawala-precursor-to-anonymous-digital.html

i'm sure the hawala system has alot more users though.  bitcoin needs way more otc traders to be compared.

Hawala is actually regarded as both an alternative remittance system and an informal value transfer system by AUSTRAC.  I suspect that other countries also have financial services laws which accommodate services like hawala and that - like ours - the definitions aren't restricted to the remittance/transfer of money or currency.  AML/KYC requirements have been expanded to cover an increasing number of transfer systems, formal or otherwise.

Both systems rely on trust trust to move money almost instantly based on information alone. Hawala is based on the trust between the hawaladars. Bitcoin reliens on the integrity of the blockchain and protocol. They are very similar in the sense that the trust does not depend on banks and government.

The difference between BItcoin and Hawala is that a Bitcoin money exchanger can operate indepedently.  

A hawalder in the remittance destination country is of no use without a relationship with the hawalder partner in the sender's country.    Also the two hawalders must trust each other as eventual settlement may not happen until a later time.

Bitcoin cuts the need for there to be any tie between the two sides.

I'm wondering how long it will take current hawalders to figure out they can use bitcoin to do deals on their own.  Bitcoins don't yet have much value for the beneficiary of a remittance transfer -- the recipient will likely be just looking for a way to convert the coins to the local fiat currency.  But to an enterprising hawalder, acquiring and holding larger amounts of bitcoins becomes useful for paying for purchases made abroad or for sale to a local investor perhaps.

Also, a hawalder has lower costs than the formal, licensed money exchangers.  

Compare the difference between Bitcoin and a Western Union.  

A WU agent location needs lots of volume to pay for the overhead.   But a Bitcoin-friendly hawalder or any other individual who provides a Bitcoin cash-out method can be profitable on every trade, even if only doing one or two exchanges per day.

It doesn't need to be a full time operation or need to start out as an intentional part-time gig even.  There no doubt are individuals who have a little extra time and a little extra money that will do this exchange "as a favor" to be able to earn the 5% or 10% that doing such an exchange can bring.

And then word gets out and in the following weeks there are two recipients who need this favor.  And then it is four, then eight, and pretty soon this individual now has this sideline business doing bitcoin cash-out service.

Also, then consider how basic business sense starts to take over.  If I am offering a Bitcoin cash-out service to you, and you turn around and use that cash to pay for your mobile phone refill, then why don't I just start selling to you mobile phone refills for bitcoins, and earn the profit from that sale as well?

So essentially, there already exists entrepreneurial Bitcoin hawalders.    Here's a list of hundreds of them in several hundred cities around the world:

 - https://localbitcoins.com/statistics

They are different systems; however I can see how Hawala brokers can use Bitcoin for settlement or to transfer funds between users and brokers.

Someone today made the comparison of BitCoin to Hawala: https://en.wikipedia.org/wiki/Hawala I'd actually never heard of Hawala before so my knowledge of it does not extend any further than that wikipedia article goes. So, I'm curious to know if you think -- is that comparison is accurate? Why or why not?