[mahyarm]

The thing is, the average consumer DOES NOT have access to with 30bps currency exchange fees. They don't have the access you do as an HFT guy does. For retail currency exchange and international transfers, especially for international remittances, the fees, paperwork, delays and bullshit are very high.

To do an international wire transfer from the US to Canada for example, costs $25-$50 and has a %3 currency exchange fee. Western Union is probably worse to some place like Brazil or the Philippines.

With Bitcoin exchanges, I can buy BTC at a total of %0.5-1 currency exchange fee, wait 10 minutes and pay pretty much no fees outside of that. We can both use our free and relatively bullshit free domestic transfer services to transfer money in and out of the exchanges. Because of the speed of transacting, the spread from delays are minimal.

[hft_throwaway]

The average consumer can do far better than 30 bps on currency trades, even on something like an Interactive Brokers account. Retail guys probably see tighter prices than HFTs do, to be honest, since FX is an OTC market and generally speaking, broker-dealers will give tighter pricing to uninformed traders than informed speculators.

Anyway, let's say we're at a dollar amount where fees and rates really add up to something substantial. To move $100k from USD -> BTC -> CAD we have to pay:

-Bitstamp exchange fee of 24 bps

-Walk Bitstamp ask book to do $100k USD worth is ~$629 vs. a mid-market price of $627.93: 17 bps

-Walk VirtEx bid book to do $111k CAD worth nets $645 vs. a mid-market price of $672.5: 95 bps

-Pay VirtEx exchange fee: 150 bps

That puts you at 2.86%, plus any slippage on execution due to price moves in BTC while you transfer it, fees to take money out, and risk that one of these exchanges steals your money. You also have risk that the rates between the two markets don't track the exchange rate precisely, since high fees create an impediment to arbitrage that would drive prices to be more efficient. Why take that risk vs. using a regulated bank? For small transfers you might be able to eek out some savings, but your time is probably more valuable than saving 10s of dollars.

And yes, you could work orders on both exchanges or trade in slices to try to avoid paying up the full spread, but that's extra work and incurs more risk. The average guy sending money from the US to Canada doesn't want to play execution trader all day.

[mahyarm]

I'm talking about the average person who wont get an IB account with it's reams of paperwork, professionals only attitude, and $10+/month minimum fees to maybe do a bunch of currency exchange for a one time or occasional thing. Also using IB as an actual currency exchanger where I get cash from US account A to CAD account B is actually pretty hard to do, they charge fees to do it, and there are long delays in the process. They basically only want you to use their FX platform to try to make money exchanging currencies, but once you want to cash out, you have to convert everything back to you home currency and take it back as a domestic transfer.

I've researched this extensively, since I had to pay my Canadian student loan while working in the US. The easiest and cheapest way to do it ended up being a schwab debit card with it's %0 currency exchange fee and ATM refunds. A close second would be BTC. Then it's Paypal, then it's the retail bank (think a chase checking account) international wire transfer service with $50 fees. Only schwab and & BTC would be relatively instant.

The actual currency exchange is also not transparent at all whenever I use any of these services except Paypal and BTC. I charge $XXX CAD, and some time later I'll see a charge for $XXX USD on my bank statement. I have a large time-span where they could of transferred at any time. I have no idea if they did profit maximizing shenanigans like BoA arranged withdrawals and deposits to maximize overdraft fees. I just know it's about %1-2 off what I saw as the mid market price on my phone when I did the transaction even with no 'currency exchange fee'.

When going from Canada to USA is even worse, since there is no such thing as a zero currency exchange fee card or account like you can get in the USA.

The amount of risk I would be taking is about 1-10 minutes with Bitcoin, and 'regulated bank' isn't much solace when things like Cyprus, Argentina and others happen. Then there is the domestic transfer out time, which can be fairly quick or up to a day or two. But when your at that stage, all of the currency exchange risk is gone.

The uneven international exchange rates are a double edge sword that will go away as the market gets bigger. The sell/buy spread between kraken and bitstamp for example is less compared to cavirtex.

In practice sending money from US to Canada with BTC is about as much work as using paypal. You just have to compare the two before you do the transfer. Sometimes it really in your favor to do BTC, sometimes it's better to do paypal.

[krrrh]

XETrade seems to work quite well for transfers from US to CA banks. Certainly much better spreads than paypal, and in practice much quicker and cheaper than BTC.