Merchant bankers – Hawala traders are being squeezed by regulators and covid-19 | Finance & economics | The Economist

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In Somalia, where telecoms operators are largely unregulated, that has already happened. According to the World Bank, around three-quarters of Somalis use mobile money—mostly denominated in dollars—and it is more common than cash.

From Merchant bankers – Hawala traders are being squeezed by regulators and covid-19 | Finance & economics | The Economist:

Now, this may be surprising to some people, but not to me. A couple of years ago, the kind people at the Economic Club of Minnesota (ECOM) invited me to Minneapolis to give a talk. The Club had arranged for a driver to pick me up from the airport and take me to the hotel. He was very interesting man of Somali origin and we had a nice chat in the car. By the time we got to the Hilton, I thought I ought to call my hosts and ask them to have him onstage instead of me because he told me about his last visit to the old country, where he was surprised to find himself paying for everything (and he meant everything, from a nickel payment in the food market to a $400 remittance to relatives) using a mobile phone.

 

“It works on trust”, he told me, “because there is no government”.

 

What he meant by this was that the telecoms operators and the mobile money services have to provide a good service otherwise people would stop using them and because there is so much competition people can switch at the drop of a hat. I might be tempted to add that no government means no regulatory capture either, so incumbents cannot use banking, payments or other regulations to erect barriers against new entrants.

It was a fascinating conversation and gave me some ideas for my talk. But I have to say that I wasn’t surprised by my taxi driver’s reports from East Africa. Way back in 2012,

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I suspect, although I’ve never been to Somaliland, that one of the reasons that Zaad and the telecommunications systems are so successful is precisely because the government hasn’t been able to control them. Monty thinks that the vigour and inventiveness and dynamism that accompany the private sector approach to providing the market with an appropriate means of exchange (shades of George Selgin’s Birmingham Button Makers here) may have a surprising outcome.

From The world’s first cashless country – Consult Hyperion:

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Merchant bankers – Hawala traders are being squeezed by regulators and covid-19 | Finance & economics | The Economist

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It is not only cheaper to use a hawala merchant than a bank, but quicker and easier too. Transfers can typically be picked up the same day. Customers do not need to prove their identity, or explain why the money is being sent. That is why it is essential in places like Afghanistan and Somalia, where large parts of the population do not have identity documents.

From Merchant bankers – Hawala traders are being squeezed by regulators and covid-19 | Finance & economics | The Economist:

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It ain’t just about programmability – Bits on Blocks

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In public blockchain based finance, this ability for one program to interact with another program, is known as “composability”. This is incredibly powerful, as it allows exponential improvements because you can trust the foundations* on which you build on. This does not exist in traditional financial rails, and probably never will.

Another benefit of public blockchains.

Programmable financial services as public goods

From It ain’t just about programmability – Bits on Blocks:

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* Not yet, but you get Anthony’s point.

POST Anonymity isn’t the answer

David Babbs is the project lead for UK-based campaign Clean Up the Internet. The campaign’s proposals argue that everyone on social media should be given a choice to prove their identity. Users could choose whether to see posts from unverified users or not. Crucially, this method of handling anonymity would still enable users who prefer to stay anonymous, to do so. Molly Millar, in an interesting piece about these proposals says that the technicalities of haven’t yet been worked out yet, although they have by me.

What’s critical to a breakthrough in this area is to understand “proving your identity” is not actually the solution and I’ll try to explain why.  It’s not a new idea to try to link social media accounts to government-issued identity, as they do in (for example) China. A while back, to pick on one example, the noted entrepreneur Mark Cuban said that “It’s time for @twitter to confirm a real name and real person behind every account, and for @facebook to to get far more stringent on the same. I don’t care what the user name is. But there needs to be a single human behind every individual account”. Politicians think the same way. In the UK, historian Damian Collins MP (chair of the Digital, Culture, Media and Sport select committee in the UK Parliament) said that “I think accounts should be verified, it can’t be right that cowards and racists can hide behind the anonymity of social media to attack people, often using multiple bogus accounts”.

These are real problems, but anyone familiar with the topic of “real” names knows perfectly well that they make online problems worse rather than better. One example that springs to mind to illustrate this is when the dating platform OKCupid announced it would ask users go by their real names when using its service (the idea was to control harassment and promote community on the platform) but after something of a backlash from the users, they had to relent. Forcing the use of real names in a great many circumstances will mean harassment, abuse and perhaps even worse. You can understand why. Why on Earth would you want people to know your “real” name? That should be for you to disclose when you want to and to whom you want to.

In fact the necessity to present a real name will actually prevent some transactions from taking place at all, because the transaction enabler isn’t names, it’s reputations. And pretty basic reputations at that. I think that online dating, frankly, provides a useful way of thinking about the general problem of online identity. In this case, just knowing that the object of your affections is actually a real person and not a bot (remember, in the famous case of the Ashley Madison hack, it turned out that almost all of the women on the site were actually bots) is probably the most important element of the reputational calculus central to online introductions, but after that? Your name? Your social media footprint? 

There are plenty of places where I would not want to log in with my “real” name or by using any information that might identify me: the comments section of national newspapers, for example. “Real” names don’t fix any problem because your “real” name is not an identifier, it is just an attribute. This is an important point. Many people who comment on this topic jumble together two quite different issues: proving the account “David Beckham” points to a specific person, and proving that the specific person it points to is the former Manchester United winger David Beckham. The first is about attaching attributes to a real-world entity, the second about is about the reputation of the real world identity. Thinking these two things through separately is, I think, a key to finding a workable solution to the social media mess, but back to that later.

What social media needs, and what will help with Mark Cuban’s actual problem with being sure that there is a “single human” behind an account, is the ability to determine whether you are a known real person or not. The way forward is surely not for Twitter et al to try and figure out who is a disinformation bot and whether they should be banned (after all, there are plenty of good bots out there) but for Twitter et al to give their users the information they need to make a choice. Why can’t I tell Twitter that I only want to see tweets from real people that can be identified?

This is the way to Clean Up the Internet. I don’t want to know the identities — it’s none of my business who a person actually is and it’s none of Twitter’s business either — I just want to know if I’m following a person or not! I know that I’m on the right track here, by the way, because noted entrepreneur Elon Musk agrees with this prescription, having reportedly told Jack Dorsey, the head of Twitter that “I think it would be helpful to differentiate’ between real and fake users… Is this a real person or is this a bot net or a sort of troll army or something like that?”.

So who is the someone who knows whether I am a real person or not? Working out whether I am a person or not is a difficult problem if you are going to go by reverse Turing tests or Captchas. It’s much easier just to ask someone else who already knows whether I’m a bot or not. There are plenty of candidates. There’s the Post Office I suppose. And my employer. Or my doctor. In fact, there are lots of people who could testify to my existence. But the obvious place to start is my bank. So, when I go to sign up for internet dating site, then instead of the dating site trying to work out whether I’m real or not, the dating site can bounce me to my bank (where I can be strongly authenticated using existing infrastructure) and then the bank can send back a token that says “yes this person is real and one of my customers”. It won’t say which customer, of course, because that’s none of the dating site’s business and when the dating site gets hacked it won’t have any customer names or addresses: only tokens. This resolves the Cuban paradox: now you can set your preferences against bots if you want to, but the identity of individuals is protected.

What is crucial here is the IS_A_PERSON attribute.

As Etherum founder Vitalik Buterin said on Twitter (4th April 2020), “proof-of-unique-human” is going to be a very valuable primitive for applications in the years to come.

and Twitter could use this to replace its binary verified-or-not tick system with a much better alternative. Twitter should mark my account as of unknown origin until it sees the IS_A_PERSON attribute. Of course, Twitter will want to see it in the form of a verifiable credential signed by someone who they can sue if it turns out I’m not a person after all, but you get the point. When I sign up to Twitter I am “unknown”. When they get a valid IS_A_PERSON credential from me, then my status changes to to “known”. Once I am known, then I can go on to be verified if I want to be.

Uknown to Verified - LinkedIn Version  

Most normal people, I imagine, will leave their Twitter account in the default setting of “known only”. Some people might want to go tighter with “verified only”. This is an important issue that I have been posting about for years, to no avail. Anne Marie Slaughter summed up the situation very well in the FT, saying that “with the decline of traditional trusted intermediaries, and the discovery that social media account holders may well be bots, we will crave verifiability”. This is absolutely spot on, and we need to construct the networks capable of delivering this verifiability or we collapse into a dystopian discourse where no-one believes anything.

The knee-jerk “present your passport to use Twitter” is not the way forward. Technology means that we can deliver verifiability in a privacy-enhancing manner, so let’s do it.

POST How does forcing people to use cash help?

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Western Union has closed its 407 locations across Cuba, a sanctions-driven move that will leave thousands bereft of remittances on an island that depends heavily on them — or force them to use less reliable ways to bring in money

From Cubans receive last of remittances via Western Union Cuba island offices U.S. Western Union | The Independent:

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Payment companies suffer frequent UPI system outages | MediaNama

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A senior payments executive told MediaNama that the current UPI system is “completely broken and it is not just outages that are the problem but there is no transparency on what is happening.” Since then implementation of UPI was left to the banks, with a zero merchant-discount-rate most of the banks are not upgrading their system while transactions keep scaling, this person said on the condition of anonymity.

“There is no economic model in UPI payments, banks are not investing and some of them have said they are not interested in even maintaining the required infrastructure. So the whole UPI system was set up in haste and was scaled in haste, that people are now losing confidence. People now are saying it’s better to use a wallet because there are no multiple parties in the chain, compared to 4 parties in the UPI system,” the payments executive quoted above said.

From Payment companies suffer frequent UPI system outages | MediaNama.

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