[XorNot]

This is absurd. I spend money by wire transfer all the time. A good 80% or so of my ebay shopping would be wore transfers to merchants in Hong Kong via Paypal. This is a big enough issue in Australia that we've had retailer associations complain about it on occasion. Overseas money transfer is not at all difficult on a consumer level.

[elithrar]

> This is absurd. I spend money by wire transfer all the time. A good 80% or so of my ebay shopping would be wore transfers to merchants in Hong Kong via Paypal.

It's worth noting that EFTs (Electronic Funds Transfers) between domestic banks in Australia is nearly always free, and that in your case you're not transferring money overseas at all.

You are transferring money to PayPal Australia, who is then communicating to PayPal Hong Kong that all is well - so that PayPal Hong Kong can pay the merchant. Both entities can transfer to/from local bank accounts because they have explicitly set up B2B interfaces (and met regulations) that allow them to do so.

In this case, PayPal is the bank, and they are a bank seeking to specifically facilitate money transfers between countries. You could not, for example, transfer money to a merchant in (e.g.) Siberia - they wouldn't be able to get that money out of PayPal into their regular bank account, because PayPal has no local presence/connection to the banks there.

[XorNot]

This is the exact same thing involved in Bitcoin funds transfer.

[ncallaway]

The article explicitly notes that PayPal is offering a very similar service. They argue that the open nature of Bitcoin is a competitive advantage to the network in the long run.

From the article: "This would not, of course, be the first global payments network. One obvious comparison is with PayPal. The fundamental advantage a Bitcoin gateway ecosystem has over PayPal is that it’s open".

[sida]

I can't reply the comment below so I will reply to this one.

XorNot: Please correct me if I am wrong.

USD is not a relevant comparison. What matters here is how money gets moved. When money is transferred within the country, a central bank (Fed Reserve, Bank of England, Reserve Bank of Australia) keeps an account for each local bank. Which means that when 'Alice' of Wells Fargo sends money to 'Bob' at Chase, the central bank actually debits and credits the banks. And then several times a day the banks will settle with each other and net out the differences.

But this is not possible internationally, that means banks must each other have direct bank relationship and have an account with each other. And if 2 banks don't have direct relationship, then they have to go through intermediary banks which they do have a relationship.

Enters Bitcoin, what bitcoin provides is not a reserve currency, what it provides in this context is a global ledger. Instead of the Commonwealth bank of Australia (CBA) needing to have a direct account relationship with Wells Fargo (WF) bank. CBA can just simply send bitcoin to WF.

There is a bit more about the underlying transfers here: http://gendal.wordpress.com/2013/11/24/a-simple-explanation-...

Although here is my question:

Why doesn't international transfers just go through the VISA network. The VISA network is essentially the global central bank

[XorNot]

Internationally banks simply have to be able to acquire sufficient foreign currency holdings. Which is trivially easy because every competent reserve bank on the planet has enormous foreign currency holdings.

But this is all irrelevant to Bitcoin - which is marketed by its advocates a consumer currency, not an international system of exchange between institutions. Institutions have no need nor desire for such a thing - it is a saturated marketplace, with literally thousands of avenues of exchange, of which Bitcoin is a particularly poor one.

Which circles back to my original point: foreign currency transactions are very simple for anyone ranging from consumers to medium or large size businesses, barring tax issues (like not paying a lot of it). Bitcoin does not solve a problem not already solved for centuries by the banking system - this is literally the thing that got it started way back with the Knights Templar.

[sida]

I have a feeling that international remittance is not as simple acquiring FOREX reserves. Often times you see international transfers from an Australian bank to a US bank taking 4 hops in between over peering banks. The process is complex.

Because unlike domestic transfer where the central bank helps keep a ledger between banks, there is no "global ledger" internationally. So banks have to resort to "correspondant banking" which is why you see so many hops in international transfers.

Bitcoin provides such global ledger. I don't think FOREX is the issue here.

Instead of going through correspondent banking (many hops), 2 banks can simply send bitcoin to each other and immediately net off.

Could you clarify if my understanding is incorrect?

EDIT: Here is a document on how VISA handles international payments

http://www.bis.org/publ/cpss53p16.pdf

2.3.3 Clearing and settlement procedures ... Settlement is not carried out through Base II; Visa merely provides the data to allow settlement to be carried out. For settlement in US dollars, Chase Manhattan Bank, New York, acts as the settlement bank. For multicurrency settlement, Chase Manhattan Bank, London, acts as the settlement bank. All members may hold their own settlement account with any other financial institution, such that all requests for funds or payments are ultimately settled through the correspondent services of domestic clearing and settlement systems. ...

[gendal]

Remember that many (most?) recipients of international remittances don't have bank accounts or access to payment cards. Hence why Western Union et al have to maintain extensive agent networks.

As for visa, I wrote about it recently here: http://gendal.wordpress.com/2014/07/05/why-the-payment-card-...

The thing to remember is that Visa authorisations are done in near real-time but settlement between issuers, Visa, acquirers and on to merchants is done over the normal banking system, as far as I know.

[sida]

Does it mean that even if it goes through the VISA network. Actual settlements still have to hop through layers of peering banks?

Do you see an advantage for bitcoin then by removing the need of peering banks?

[XorNot]

Transacting in US dollars accomplishes the same thing, with far less volatility. In fact, transacting in any commonly exchanged currency does (US is the global reserve for this reason - you can exchange US dollars for any currency on the planet - notably Chinese currency - easily).

Moreover, there's no benefit here: dealing with separate Bitcoin services removes any end-user guarantees. If I send money from Australia to England, Paypal Australia has to deal with the Australian government and the British government to obey consumer law. With a Bitcoin exchanger, once the BTC is transferred you're at the mercy of whatever local exchanger you use at the destination.

Paypal wants to stay in both countries, which means there's an end-to-end legal protection for both parties.

The open-nature of Bitcoin is irrelevant. The USD is pretty damn open.