Topic: How To Open A Currency Exchange In Another Country??? (Read 3009 times)

I cant believe you starting the idea based on a completely wrong observation

Who would send money to China and VietNam through Western Union. The communities have already developed a money transferring network among themselves.

Dont believe me, ask any Vietnamese/Chinese friend.

What you're promoting is just basically bank wiring from Mtgox/CryptoX. Why would you need bitcoins?


Ps. no, sending $100 to VN doesnt have $20 fee.

Since both are traded on international Forex markets, WU can just use those. A Bitcoin exchange will have to either find buyers of Bitcoin locally or convert to USD and convert that to local currency on the international Forex markets.

How does western union do it? How do they buy local currency in vietnam when the input is dollars in the us? It is this transfer of fiat from the us to vietnam which is the interesting mechanism which needs to be copied.

The difference is that in the remittance destination country, the roughh equivalent of a "hawalder" can work independently and doesn't need to have any trust relationship with the hawalder receiving funds on the other end.


Lower fees for one.


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 recipient of a remittance transfer but in bulk they do have value to an enterprising hawalder, such as being useful to pay for purchases made abroad or to sell to a local investor perhaps.  


That's the difference between Bitcoin and a Western Union.  A WU agent location needs lots of volume to pay for the overhead.   An individual who provides a method to cash out your bitcoins can be profitable on every trade.  It doesn't need to be a full time operation or need to start out as a part time gig even.  There no doubt are individuals with a little extra time and money that will do this exchange "as a favor" to be able to earn the 5% or 10% that doing so will bring.  And then word gets out and in the following month 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 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 yo mobile phone refills for bitcoins, and earn the profit from that sale as well?

The difference is that you can settle immediately and thousands or millions of dollars of value debts don't pile up resulting in ostracism or murder when someone defaults.

This is why cash-based businesses are ideally placed to offer such services as a sideline.  They have the cash on hand to give to recipients and they're often not putting all of their takings through the books to begin with.

Bear in mind that many recipients who are dependent on money being sent back home don't have bank accounts, and that those who have bank accounts often already have access to existing low-cost methods of transmitting money.

Bitcoin could be useful for getting money out of some of the countries mentioned.  Getting black money out of India, for instance, can be quite difficult.

What I plan to do is develop a network of private lenders. If they get loan re-payments in Bitcoin, they won't be exchanging them for cash. The bitcoin received will likely be through BitInstant. I will be exchanging the Bitcoin for cash through a PNB deposit. Bitcoin will evolve as people get used to using it.

This seems be be a good method which can be done remotely.  You don't even have to open a store front.  Just tell people to send you bitcoins (by email perhaps) and then you write a deposit slip, go to the bank and deposit the local currency into the user's account.  The user will need to have a bank account, of course.

I'm interested in the Philippine exchange. What seems to be happening now is people send me bitcoins and I simply deposit the cash to their bank account. (I give them a list of preferred banks, such as BPI and BDO simply because those are near my location.)

So you'd need to have a lot of cash on hand if someone decides to send you a lot of bitcoins.

The other way around is a little more difficult since I don't have enough bitcoins to exchange with people's cash, yet. Not too many locals have been willing to give me bitcoins (or have any to give at all.)

You're essentially describing hawala.  Where is the incentive to add the extra layer of using Bitcoins at both ends though?  Why add extra, potentially traceable steps to the process - the reason it works is because it doesn't need to intersect with the conventional banking system and funds don't need to leave the country of origin.  You can only compete with WU and hawala if you can offer the same ease of access - a dealer in virtually every neighbourhood.  The families back home to whom people want to send funds are often nowhere near urban centres - you need to partner with existing businesses in the neighbourhood and have them adopt funds transmission as a side-line as a stand-alone money transmission service isn't going to be profitable in many regions.

As with any business, you can't take for granted that you'll be immediately profitable. I would plan on living off of savings or some other source of income for at least a year (if the demand is there it probably won't take that long but I've learned to be very conservative).

In the meantime, I'd look into the most efficient ways of exchanging your BTC for other currencies and having it transferred to your local bank. It might cost you until you find locals willing to accept BTC for goods and services but you should consider it just another business expense.

What would the motivation be for the local operators to participate?   They have a flow of customers because of the agreements they have with Western Union, etc.  Not just any person on the street can do transfers for WU and other networks.   I doubt these operators want to create competition that will cannibalize their business.

Additionally, generally where remittance transfers are high (India, Philippines, Mexico, Bangladesh), the restrictions on the networks allowed perform exchange services are high as well.

Now for bitcoin, there's no technical restrictions stopping anyone from performing exchange services.   A person with a smartphone, a few dozens of bitcoins and a wad of local cash has the tools to become a solo operator providing exchange.  Because most (nearly all) of the transactions will be cashing out bitcoins (e.g., from remittance payments or maybe income from microtasks  or oDesk type of work) so this individual will end up needing to sell bitcoins to restock the wad of cash.   This will create a distribution system where bitcoins flow up the distribution chain to larger exchangers who trade internationally.  In this distribution chain then cash flows down to the local exchangers.

If this network were to be built in this manner then it isn't a singe operator that can be forced to use official exchange rates and since a single party didn't have control throughout the distribution chain, a single party doesn't have the info for reporting the details on all transactions.  The ability to know how much bitcoin-related activity is actually occurring would be difficult even.  

Bitcoin's nearly-free transactions make it so that there is no exchanger too small.  Instead of there being formal currency exchange booths, there is an exchanger that your coworker is related to, for instance.  So you trade with the coworker (for a small fee) and the coworker does the trade with the relative that does perform exchange.

It probably needs to be these personal type of pre-existing trusted relationships otherwise the alternative, the craigslist model (directory of anonymous individuals pitching their offerings) simply provides criminals intending to steal a steady stream of unsuspecting marks.

I don't know how you get from here (no awareness of bitcoin, no exchangers) to there (ability to ask around and end up where someone you know will trade with you, because they know someone who will trade with them).

It probably won't occur quickly if left to happen organically yet at the same time that approach might take no longer than trying to get bitcoin exchange approved formally.

There's one other angle though.  The reason remittance payments are sent in relatively larger amounts (e.g., $250 at a time) is because the transaction also includes a fixed per-transaction fee, so sending a larger amount helps to make the overall fee on a percent basis lower.   Since bitcoins can be sent in small transaction amounts the sender can help encourage bitcoin adoption by augmenting the traditional remittance payment by sending a small amount of bitcoins as well.  If Western Union ends up costing 15% or more then it is in both the sender's and recipient's best interest to try to help bitcoin become a worthy competitor to the traditional money transfer services.  Now with a Bitcoin SMS Wallet provider ( https://coinapult.com/sms-wallet ), there's an easy way to drive the adoption of bitcoin simply by sending a little over and seeing what the recipient can do with it.  [Update: Coinapult is U.S. and Canada numbers only, but they are figuring out how to go to more countries.]

Too bad there aren't Walmarts in Vietnam. I can't believe I just wrote that. 

In order for the exchange to keep a supply of local currency the locals need a reason to buy Bitcoins. The most sustainable reason is for importing.

Get MemoryDealers to open a computer store in Vietnam on conjunction with the exchange to allow the exchange rate to be driven by the flow of Bitcoin-driven trade.

There are a shitload of small money transmitters sending money to the Philippines.  If I walk up the main street of the suburb next to me, almost every small business offers money transmission to the Philippines through services which aren't WU (they probably make more money from this than from their core business).  It works because the recipient can collect the funds from a small business at the receiving end (the businesses which offer this are invariably cash sale based). 

You also need to remember that Hawala networks are extremely widespread in Asia and often operate without funds ever leaving the country of origin.

Money transmitters like WU make most of their money on the spread.  They buy currency at one rate and exchange it for customers at another.

WU has half a million outlets world-wide, which is why even other money conventional transmitters have found it very difficult to penetrate the market.  They've also started partnering with existing banks to provide money transmission services.

HyGold has been operating in Vietnam as a e-currency exchange for 5 years.  Technocash also gets a significant amount of business in the SE Asian market and there are tons of smaller money transmission services offered by small stores.  But none of them have the reach of WU because they don't get cash in the hand of the recipient within hours.

There's a lot of money being sent back home to families in SE Asia on a regular basis, and fees are definitely an issue because they reduce the amount the recipient receives - and $10 goes a long way in many Asian countries.  For the most part, though, the process needs to be simpler than the mechanisms which already exist.  The recipient needs to be able to have the money transmitted in their hand in local currency within hours of it being sent not have to go through additional steps to turn it into local currency or travel any great distance to receive the funds.  While Bitcoins can be sent easily and at little cost, the recipient needs to be able to convert them to cash on the spot without having to travel to Saigon and at minimum cost - that's the particular problem you need to solve.  

In the Philippines and other Asian countries, private loans are virtually unregulated. They are short term and high interest. Many filipinos have family members overseas that can also help out when needed. Western Union and Xoom are either expensive or inconvenient. Now they can go to Walmart and send Bitcoin to an email address for a few dollars. I see this as a potential niche market. Years ago I might have called this loansharking, but I reserve that term to the title and payday loan operators nowadays. Private loans are for far less fees and interest.

I think receivers of remmitence payments are usually unbanked and would want to convert their bitcoins to cash, not a bank deposit. So an exchange booth on the street is probably the best way of starting off.

I think it would be best to partner with a local operator of local currency exchange booths. They already have all the necessary licences and infrastructure.

Yes I probably could to rich and techinical people.  However, right now there is a need and that is to send money to family overseas.  Western union and moneygram charge 10-20%.  If you send $100 they will take $20.  That $20 could have been a months supply of food for a person in Viet Nam.  So I would think this opportunity is huge because people need to eat.

I have an interest in making Bitcoin happen in Vietnam. I have a few Bitcoin friendly contacts in HCM and Ha Noi that are either developers or working in the traditional finance sector that may be useful. Roger Ver has a good base of Vietnamese Bitcoin friends that may prove useful.

PM me for details on any of the above.

Otherwise, I'm subscribed to this thread to follow progress!