I started this discussion a while ago and we reached a point where it became apparent that it's very difficult to do it legally: https://bt.irlbtc.com/view/48704.0

If you have any expertise in this area, please jump in!

You will still need to comply w/ same AML requirements of both countries (sending & receiving country).  So just because Bitcoin itself is anonymous doesn't mean that cash transfers can be anonymous.  Still there is no reason why you can't require ID at both ends and essentially work like a non-monopoly Western Union network of peers.

Granted because of the legality bootstrapping a venture like this isn't something 2 college kids w/ $800 are going to be able to pull off but for someone with proper venture capital backing the huge profit margins of WU make it a tempting target to decentralize.

Legal, compliance, and reporting are the big issues.  If you are running the network you need to ensure each storefront in each country is in compliance w/ the host nation's legal requirements related to currency flows.  Not impossible but it is going to require a legal team.  You will also want some mechanism to accurately record Identification and have it available for law enforcement.  Not being able to do that will get you closed and likely charged with money laundering.

Convincing merchants to join the network will be easier if they see some serious commitment to legal compliance, and reporting.  Any merchant participating in the network is potentially liable for AML fines.  In the US you can not only pay a stuatory fine but if found to be willfully noncompliant can face in-reim forfeiture (govt becomes the owner of your assets).  Most businesses of any sizable value would want some sort of insurance to protect them in the event of accidental violation of the law.  Any insurance company would be glad to write such a policy but not without reasonable due diligence into your legal framework.

So the technical aspects are almost trivial compared to the compliance/regulator/legal issues.  Certainly do-able but would require "real" funding, business plan, incorporation, insurance, etc.

Unfortunatly you are so right. I did some more research after I started the other thread and starting this business will most likely require 7 figures funding. It's a little too much considering the current Bitcoin ambiguous legal status. I can only hope that in a few years the situation will change.

Once I though to became an agent for a young and cheaper alternative to WU. Then I found requirements in the country where I am:

- reputable enough history
- over $3 mln capital (for the third world country!)
- having bank license or being shopping mall or large international hotel
- etc.

Don't thing that in other countries it could be very different. In other words it means: "Get off you small Charlies from this game". Nobody will allow you to open office with money transfer business (whatever virtual currency) without proper licensing.

I tried to make a wire transfer 2 days ago, and yet again the banking industry managed to surprise me with their new height of ineptitude.

I gave them clear printed instructions for the wire transfer, but they couldn't do it because "the SWIFT code is invalid". There's a bug in their outdated software that failed to parse a perfectly valid SWIFT code, and yet they kept insisting my information was wrong. So I had no choice but to withdraw everything in cash and deposit them into a second bank.

Bank #2's software managed to recognize the SWIFT code (Well done! ), but before the bank clerk could send out the wire, they had to "confirm with the manager". The "confirmation" wasted me 10 minutes and in the end I was told that the cash deposit would have to be held for 2 business days before the funds can be sent out. Bank #2 couldn't clear bank #1's certified cheque on the same day (there's that ineptitude again) so I had no choice but to do the transfer in cash, and now my money is being held hostage.

Between a bank that can't recognize a valid SWIFT code and a bank that takes 2 business days to check for counterfeits in a cash deposit MADE IN PERSON, I can't tell which one's worst. What do you guys think?

I can tell you what I think, not that it helps for a second though: I think those banks are crooks.

...or they're neither. They're just a business. A business consisting of perpetuating debt (=money, or versa visa).

The person you send a WU transfer to generally gets paid in their local currency - you wire money when you want the receiver to have instant access to funds.  Bitcoin might be able to offer fast transfers, but the person receiving them still has to take additional steps to convert them to local currency - either selling them OTC or selling them on an exchange and then withdrawing the proceeds, both of which take time.

There are a ton of money transmitting services apart from WU around and plenty of them have low fees for payments which are transferred to the bank account of the receiver.  These businesses are already licensed and already have the infrastructure to support smooth processing of payments.

Individual merchants aren't going to make enough from Bitcoin to justify the up-front cost of becoming licensed money exchangers/transmitters/deposit takers/whatever.  Merchants in a given location could set up a company and have that company obtain a financial serviced licence under which they could all operate as money transmitters but you'd still need a lot of daily transactions to offset the cost. 

People aren't going to use Bitcoin to receive funds if they can't conveniently liquidate them or spend them.  Merchants operating as Bitcoin>fiat exchangers would need to locate where there's a demand for that service.  If Bitcoin exchangers aren't easy to get to then people will just choose an alternate method of receiving funds.

To become competitive in the instant payment processing market, the whole fiat>Bitcoins>receiver>local currency cycle needs to happen in a much faster time frame.  If people can't spend the funds they've received instantly, then Bitcoin offers no real advantages over existing low cost payment processors - it's more effort to use Bitcoin and people need a significant incentive to use a platform which requires more effort.