Fintech companies have chased a particular milestone for years: an application that lets anyone anywhere send money directly to another person's smartphone with a single action. Bill Barhydt, CEO of t
Fintech companies have chased a particular milestone for years: an application that lets anyone anywhere send money directly to another person's smartphone with a single action. Bill Barhydt, CEO of the crypto payments firm Abra, told interviewer Jim Epstein at Reason magazine that this vision is now operational. Abra built a global P2P payments platform on Bitcoin that functions across international borders and converts between currencies without traditional banking infrastructure.
During the interview, Barhydt walked through how Bitcoin makes this possible. Existing mobile money services depend on centralized banks. Venmo relies on Wells Fargo. M-Pesa in Kenya relies on a Kenyan bank. Abra removes the bank from the equation.
"With Abra there is no bank," Barhydt said. "We actually turn your phone into its own bank using Bitcoin blockchain technology in the background in a way that's very transparent to the consumer. So, the user experience is very Venmo-like or very PayPal-like, but what's happening behind the scenes is totally different. And this is really important because it's what enables Abra to work legally at global scale."
Behind the scenes, Abra converts between Bitcoin and local currencies automatically. "The money is actually on the phone," Barhydt added. The app hedges Bitcoin values to traditional currencies in the background, allowing users in different countries to transact in their local money. Since the company never takes custody of customer funds, it faces no jurisdiction-specific regulation.
"The Abra app works the same for you as a consumer whether you're in Turkey, Germany, Russia, New Jersey, or Toronto," Barhydt said. The company can operate identically everywhere because it doesn't manage user money.
This approach solves a problem that destroyed earlier attempts. Barhydt previously founded Boom Financial, which pursued the same objective. That company hit regulatory walls.
"[I] realized that I was fighting a multi-billion dollar, decades-long battle to get this live globally, which was simply not tenable for a startup," Barhydt said. "It probably wouldn't be tenable for Citibank." The regulatory licensing requirements were immense and spread across too many jurisdictions.
"Even if they relaxed regulations a lot, it still wouldn't prevent me, in the old model, from having to have licenses all over the place, having to have banking relationships all over the place, [and] having to have heavyweight AML and Know Your Customer requirements all over the place," he explained. "And it's just too much friction to get a global banking system to work like that."
Bitcoin's architecture sidesteps all of this. Since Abra doesn't hold customer funds and doesn't position itself in the middle of transactions, the company avoids the entire regulatory apparatus. The operating principle is that regulating Abra works the same as regulating physical cash in someone's pocket. With Abra, that cash is digital and stored on a phone.
Governments will still regulate aspects of the platform. Abra blocks Iranian IP addresses because of U.S. sanctions. Most regulatory pressure will focus on money entering and exiting the system rather than what users hold inside it.
"The government can't stop you from holding ones and zeroes on a phone," Barhydt said. "What the government can interfere with is the means by which you got those ones and zeroes on or off the phone in the first place."
Abra offers three mechanisms for moving money into accounts: a standard bank transfer, a Bitcoin deposit, or a transaction with an Abra teller. Bank transfers require Know Your Customer compliance through Abra's exchange partners. Bitcoin and teller transactions need no personal information.
"Think of an Abra teller as a human ATM machine," Barhydt explained. "This human ATM machine can process a deposit and a withdrawal for you into or out of your Abra app anywhere in the world for any currency. But these people are not acting on behalf of Abra, they're acting on behalf of themselves. They're actually buying and selling the money on and off their own phone."
The regulatory treatment of Abra tellers remains unresolved. Barhydt argues that most countries don't currently regulate peer-to-peer transactions of this type.
"It's early enough where very, very few people are even thinking about regulating those kinds of transactions," Barhydt said. The regulatory framework for this model hasn't solidified, leaving room for the platform to operate while jurisdictions figure out their approach.
