Blockchain should ‘lower remittance fees’

22 May 18

Blockchain technology can help fragile states by lowering the fees of remittances but risks ‘opening channels’ for terrorism funding and money laundering, a panel argued yesterday.

Remittances bear a huge burden on developing countries as billions are lost every year through transfer fees, which could be used for development, the panel at the Overseas Development Institute offices in London noted.   

Charles Collyns, director of the Independent Evaluation Office of the International Monetary Fund, said there was a huge potential for new technology in development.

“Many potential options are being developed that can vastly reduce the transaction costs to be hugely beneficial,” he told the audience.

“There is a major concern though that it can open up these channels, without scrutiny, and could also be used for terrorism financing or money laundering purposes,” he said.

He said that although new technology comes with “massive opportunities”, it comes with risks of opening up these channels.

An average of 12% is lost in transfer fees of money sent back to relatives in sub-Saharan Africa, according to 2014 ODI research.

These fees cost the African continent $1.8bn a year, which could be used to pay for schools and other development needs, the ODI said in a report on remittances.

David Carew, former finance minister of Sierra Leone, said the money sent back home to relatives can help people afford things, such as healthcare and often education, without needing money from the government.

He said it reduced the pressure on governments to fund things like free education. 

“I hear your concern about terrorism funding, but there are international structures to deal with that and it’ll come under compliance,” he said.

OECD’s Kathryn Nwajiaku-Dahou, head of statebuilding, ODI’s Marcus Manuel and Rachel Glennerster, chief economist at the UK’s Department for International Development were also on the panel, which was chaired by ODI’s executive director Alex Thier.

They discussed the approach to support fragile states at an event at the ODI yesterday.

The World Bank said last month that there has been a rise of remittances to low- and middle-income countries.

Money sent by migrants to their home states, which include high-income countries, increased 7% to $613bn in 2017, from $573bn the previous year, the World Bank figures showed.

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