Bitso is a Mexican Bitcoin exchange that is using the cryptocurrency to offer its customers cheaper and faster international money transfers. Money transfers involving “conventional” currencies (Dollars, Euros, …) require intermediaries at both the sending and receiving ends and, more often than not, involve additional players to handle the transactions. This makes the process slow: it can take several days for money to be transferred from one country to another. It also makes it expensive: not only do intermediaries apply fees for their services, but they also charge extra to users who want quicker disposal of their money. Understanding how Bitso is vying to change this model requires getting to grips with the fundamental workings of the Bitcoin economy.
Bitcoin is generally associated with sketchy websites, gambling and other unsavory activities . It is often regarded as a peculiar internet proto-currency used mainly by speculators. However, it is seldom considered a fully-fledged currency equivalent to the Dollar or the Euro. But is this characterization correct? Bitcoin shares several of the basic characteristics of “conventional” currencies: durability, portability, divisibility, recognizability, scarcity and fungibility . More importantly, since the 1970’s, “conventional” currencies have no longer been backed any tangible asset: the “gold standard” (system in which the domestic money supply was directly tied to each country’s stock of gold) was replaced by a fiat money system  (currency that a government has declared to be legal tender, but that is not backed by tangible assets ). This means that, in practice, the existence of these currencies is based on trust. Sounds familiar?
So, if Bitcoin shares so many properties with “normal” currencies, why is there so much skepticism around it? This is because it differs from “normal” currencies in one fundamental aspect: Bitcoin is decentralized. That is, no single centralized institution controls the bitcoin network (in the way the Federal Reserve controls the Dollar), and thus Bitcoin is not subject to the authority of monetary policy setters . The supply of “normal currencies” is determined by Central Banks that increase or reduce the supply of these currencies to meet a set of economic objectives . The supply of Bitcoins is increased through a process in which users who give up some of their computing power to track and validate transactions are rewarded with newly generated currency  (the supply is never decreased). If the idea of a non-centralized currency issuer seems far-fetched, it is worth considering that during the second half of the 19th century, the Federal Reserve did not exist and commercial banks emitted their own currencies . Thus, giving Bitcoin the status of conventional currency no longer seems unreasonable.
Bitcoin’s decentralized nature rests on a technology called blockchain. A blockchain is a data structure that makes it possible to create a secure digital ledger of transactions and share it among a distributed network of computers without need for a central authority . This feature is what allows Bitcoin transactions to be much faster and efficient than those made in traditional currencies: Bitcoins can be transferred from one individual to another in a matter of minutes with minimal or no intervention from intermediaries. This is the technology Bitso uses to creates value for its customers: Bitso receives fiat money in the origin country, converts it into Bitcoins, and then uses those Bitcoins to buy fiat money in the destination country, all through Bitso-owned exchanges . Efficient, fast, and at no point did the user have to learn about the intricacies of the Bitcoin ecosystem.
Bitso has centered its strategy on the Mexico – United Stated remittances market. In 2015, remittances reached 26 billion dollars or 2.8% of Mexico’s GDP , making Mexico the fourth largest recipient of remittances. In the third quarter of 2016, sending money from the United States to Mexico through “traditional” currency intermediaries cost users an average of 4.49% of money transferred with delivery times that ranged from less than an hour to up to five days . Sky-high rates in such a large market puts Bitso, which already runs Mexico’s largest Bitcoin exchange, in a prime position to disrupt the money transfer industry. What could go wrong? A lot. Governments could regulate and even prohibit Bitcoin transactions. Bitcoin usage could diminish, thus making Bitcoin less liquid and more expensive to transact with. New cryptocurrencies that challenge Bitcoin could emerge. However daunting the task, Bitso has already offered an alternative to the millions of individuals who pay abusive rates for a subpar service.
1 Jeremy Rubin, “What the #?!* is Bitcoin?” September 30, 2014, video file, TEDX Beacon Street, http://www.tedxbeaconstreet.com/2014-videos/, accessed November 2016
2 Bitso, “FAQ”, https://bitso.freshdesk.com/support/solutions/articles/11000001155-respuesta-por-qu%C3%A9-tienen-valor-los-bitcoins-, accessed November 2016
3 Mark Harrison, “Is the Gold Standard as Good as it Sounds?”, Financial Times, June 15, 2013, https://www.ft.com/content/ccf928b8-bbef-11e2-a4b4-00144feab7de, accessed November 2016
4 “The Origins of Money”, The Economist, February 16, 2015, http://www.economist.com/news/books-and-arts/21643036-monetary-systems-have-always-been-imposed-sovereign-means-exchange, accessed November 2016
5 CoinDesk, “What is Bitcoin?”, http://www.coindesk.com/information/what-is-bitcoin/, accessed November 2016
6 “Bits and Bob”, The Economist, June 16, 2011, http://www.economist.com/node/18836780, accessed November 2016
7 Federal Reserve Education.Org, “History of the Federal Reserve”, https://www.federalreserveeducation.org/about-the-fed/history, accessed November 2016
8 Steven Norton, “CIO Explainer: What is Blockchain?”, The Wall Street Journal, February 2, 2016, http://blogs.wsj.com/cio/2016/02/02/cio-explainer-what-is-blockchain/, accessed November 2016
9 Daniel Cawrey, “Ripple Network Expands to Mexico With Addition of First Peso Issuer”, CoinDesk, May 12, 2014, http://www.coindesk.com/ripple-network-expands-addition-first-peso-issuer/, accessed November 2016
10 World Bank, “Personal Remittances, Received (% of GDP)”, http://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?year_high_desc=true, accessed November 2016
11 World Bank, “Remittance Prices Worldwide”, https://remittanceprices.worldbank.org/en/corridor/United-States/Mexico, accessed November 2016