Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.
Sign up to join this community
I hear a lot about Western Union and associated costs in the context of remittances. Also there are exchange rates anyway, between one currency and another. Also there is inflation and bank fees.
Why don't normal people use anonymous cryptocurrencies like Monero instead of expensive and troublesome fiat money?
Let me tell you a true story that I observed in my working life about the importance of failsafes in financial transactions:
I was on my company's M&A team, preparing for the acquisition of another company in our industry. This company had a long list of part-owners [something like 50+]. The purchase price meant that the average payout was something in the ballpark of $100k. For various reasons, we were going to pay each individual party directly, so part of the negotiated sale documents included provision of a list of approved bank details for receipt of wire payment.
In the weeks leading up to the sale, I called each individual to confirm validity of those details. The lawyers on the acquired company did the same thing. Someone who worked under me did the same thing. My boss did the same thing. There were maybe a dozen iterations of the sale documents before finalization, and each time, those details were confirmed to be unchanged, and at the end of it, we had signed verification from each party, as well as the independent phone calls, confirming all bank details.
The day of the sale came and went - everyone got paid, or so we thought. The next day, one of the prior owners called us to say they didn't see the wire receipt in their bank account. We investigated, and found that this guy had given us incorrect details. He had in the multi-100's of thousands of dollars coming to him, and at least 4 separate times, he lied about having his bank details in front of him when he gave the agreement that the info was correct.
Do you know what happened? We called the bank, they agreed that funds had been transmitted to a null account, and after a verification period, the receiving bank reverted funds back to ours, and we were able to pay the amount to the correct person. [note: If the details provided had been a valid recipient account #, it would have taken longer, and a small chance exists that if those funds had been immediately liquidated by the ill-gotten recipient, we would have had to take legal action to rectify the situation. But even in that case, we would have known who it was [or rather, the recipient bank would have known], because of the maintenance of the KYC network].
Do you know what would have happened if this guy had given us an incorrect crypto address? The funds would have been wiped from existence.
This was probably the largest financial transaction of this man's life, outside of possibly a home purchase, with an extended confirmation period and multiple avenues of verification, and he still couldn't get his own bank details right!
So now you tell me - what are the chances that you could explain, safely, the Monero methods, to a man who didn't understand that his bank's phone number was not wire payment instructions?
Edit to redirect to answering the question as asked - per @Geoffrey Brent in the comments to this answer: 'One of the reasons many people don't use crypto is that it's full of people who believe things like "it's okay for somebody to lose their life savings without recourse, if it's by their own mistake"'.
The asker is trying to proselytize about the merits of crypto, specifically to those who don't use it + don't know how to use it, and still finds time to blame such a person for any financial loss they might suffer if they use the system s/he is asking them to use! Well guess what - when faced with the risk of this type of loss due to personal error, most people refuse to get involved!
There are several reasons why cryptocurrencies are no option for everyday commerce:
Admittedly, some of those problems can be solved or at least alleviated by cryptocurrency exchange providers. But if you rely on those companies to take care of all the complicated and annoying stuff, then you pretty much reintroduced the problem cryptocurrencies were supposed to solve. You created a system of privately owned banks which can be regulated by state actors.
I wrote it in a comment, but the comments have since been cleaned up (numerously, I think). So I'll write it in an answer.
Unbanked people, those who routinely use cash and money transfer services like Western Union do so because they're either too poor and/or uneducated to use the banking system, do not want to have any transactional trail, or because they're restricted from the banking system.
For the first group, KISS.
People who are poor - they're probably limited in their ability to access high tech, reliable internet connection, and do not want the associated costs. These are the people who use pay-as-you-go phones and won't spend money and time on trying to learn about crypto and use it. They may have heard that it is highly volatile, or they may try it and get burnt with a significant (to them) loss that would inevitably happen quickly due to the crypto's inherent volatility. They also have the access barrier as to convert their cash to crypto to begin with because they are... unbanked.
The uneducated part of that group - they struggle with understanding the conventional banking, why do you expect them to understand the crypto? Think about old people, people with low intelligence, or just people without access to information (in most cases closely related to them being poor). I remember how difficult it was to explain the concept of "email" to my grandfather. He called it "fax" because that was the closest communication concept he was familiar with. That was in late 90s/2000s, not so long ago. Email existed for how long? 30 years by then?
For the second group - well clearly if you don't want to have a trail, crypto is not for you. Trail is built into the system. Of course a lot of criminals and scammers are using crypto, because they (wrongly) believe that it is anonymized and they cannot be identified, so they don't worry about the trail. But those who do - will not use it.
For the third group - the access barrier is still there. Since they're excluded from the banking system, they won't be able to convert cash to crypto and back easily. Some can mine their own crypto (e.g.: Russians right now, North Koreans, etc), but that requires at this point infrastructure that needs institutional support, individuals can hardly mine enough for it to be a meaningful replacement of the banking system and cash.
For everyone else - all the things you see as negatives are considered positives. Regulation, oversight, ability to trace and track, ability to revert transactions and recall funds, ability to identify senders and receivers and easy interaction with accounting and tax reporting due to the operational currency being the same as the official government currency - all these are positives for most people. You are the exception.
TLDR: Because it just doesn't work, and there are far better solutions that do actually work, that people are actually using because they do work.
Long version:
Weaver’s Iron Law of Blockchain... is: When somebody says you can solve X with blockchain, they don’t understand X, and you can ignore them.
...
The fact that somebody was purporting [vaccine cold chain] to be a real-world application [for blockchain technology] meant they had not even thought about the problem for five seconds. They had no familiarity with how cold chain works. They had no familiarity with how the sensing process works.
We see the same thing when people talk about cryptocurrency being able to “bank the unbanked.”
...
If you take any of these people and you ask them what M-Pesa is, they will look at you like you’re speaking [Swahili]. Because, well, you are. So for those who aren’t familiar, M-Pesa is a payment system started in Kenya by Vodafone about the same time as Bitcoin. [Note: Pesa is Swahili for money, and the “m” stands for “mobile.”] It has eaten the Third World. It’s huge. Because it just basically attaches a balance to your phone account. And you can text to somebody else to transfer money that way. And so even with the most basic dumb phone you have easy-to-use electronic money. And this has taken over multiple countries and become a huge primary payment system. [Whereas] the cryptocurrency doesn’t work.
So, El Salvador. The president of El Salvador is a totalitarian nutcase. And one of the things he did as a totalitarian nutcase is pass a law saying Bitcoin is legal tender. But you aren’t actually using Bitcoin. Instead, they created a new wallet, the Chivo wallet, that’s an electronic payment channel that takes Bitcoin and dollars and just updates your balance in a central database. It’s not actually doing a transfer. And the Bitcoin folks like to go, “Oh, but there’s this lightning network thing that allows these layer two transfers in a trustless environment, so you aren’t trusting the central Chivo app.” That is still limited to adding three to seven people per second globally to the system. So you can’t actually onboard that system. It just doesn’t scale.
And so the one case where we’ve had an attempt to do a wide-scale “pay with Bitcoin” system, El Salvador, they gave up and aren’t actually using Bitcoin. They’re using a centralized database in an app. And because the value of the numbers in the centralized database bounces around, nobody actually uses it. People just signed up for the free money, then transferred it, and have since stopped using it. [Note: Seeking Alpha reports that “virtually no downloads [of the Chivo app] have taken place in 2022” and “it seems that people were incentivized to download Chivo given the $30 bonus offered by the government.”] So even when you have a central database and a central authority, cryptocurrencies don’t work for payments, because they bounce around in price.
-- Why This Computer Scientist Says All Cryptocurrency Should “Die in a Fire”
You still need to have a bank account to buy cryptos. Unless you are mining them, the standard way to get cryptos is to buy them from some exchange either via wire transfer or credit card.
