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Because I work in several countries, I am sometimes paid in US dollars on my US account. Changing the money in Shekels and transferring it back to my account in Israel through the bank costs about $40 per transfer.

It has been suggested to me, that the best exchange rate, and cheapest, and quickest way to move money from the US to the Israeli account, is to buy and sell Bitcoins for the amount I need to transfer, online.

I have searched online, and found bitcoin websites that sell bitcoins in dollars, and sites that buy bitcoins for shekels. (and visa versa)

Is this method advisable? Are there any particular pitfalls in using Bitcoins?

closed as primarily opinion-based by SztupY May 2 '14 at 10:46

Many good questions generate some degree of opinion based on expert experience, but answers to this question will tend to be almost entirely based on opinions, rather than facts, references, or specific expertise. If this question can be reworded to fit the rules in the help center, please edit the question.

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    money.stackexchange.com or bitcoin.stackexchange.com might be more appropriate sites for this question. – Gala Apr 24 '14 at 11:04
  • The odds of those sites having the expertise needed to answer this question would be slim. Unless said person just also happens to be an Expat with experience in this. – avi Apr 24 '14 at 11:22
  • Maybe but Bitcoin is a small niche so I don't think you will find a lot of expertise about it here either. And then you don't need to be an expat to have a need to transfer money between countries so whether this is on-topic at all is debatable. – Gala Apr 24 '14 at 11:56
  • Perhaps if the question would be more specifically related to expatriation (say about remittances), it would have more success (note that I personally haven't voted either way, it's just that in its present form, it's likely to be closed or be better received on the other sites). – Gala Apr 24 '14 at 12:06
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    Thanks! I added the context and expanded the question a little, I hope it's OK with you. I still think you could get good answers on the other sites but at least it should unquestionably be on-topic here, now. Interesting question in any case (+1). One last thing that could be added is an idea of the size of the transfer you typically need (a few thousand dollars?) – Gala Apr 24 '14 at 12:25
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Probably not.

The first issue is Bitcoin has tremendous volatility, more akin to a dodgy commodity than a currency. For this reason you will (probably) want to cash out as soon as possible. You wouldn't want to be holding a lot of value in Bitcoin when there is another "scandal".

This is compounded by the second problem with BitCoin as a currency, that it has very little utility (ie. not many places you can spend it). So you will need to immediately incur two sets of of transaction fees as you cash-in and cash-out. I say probably, because you might find that with a little bit of arbitrage, that you can win on the effective fx-rate, but the odds are slim.

Opening a Bitcoin account is non-trivial, as most sites now implement some sort of KYC in order to keep on the right side of money laundering regs.

Finally, (although much less significant) is the way Bitcoin is treated for tax purposes. The US Fed has declared that it is a commodity, meaning that if you sell it at a profit, you are (theoretically) liable for tax. Of course this won't happen in practice, so only a minor consideration.

If you do decide to give it a whirl, test the transmission route with a small amount first, and BACKUP YOUR BITCOIN WALLET.

  • Thanks. The idea here, is that you would be buying and selling the bitcoins within a couple minutes of each other, if not seconds at most. Would your warnings still apply? i.e.: Buy coins, switch websites, sell coins. – avi Apr 24 '14 at 15:13
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    That's what I thought, so you need to do the sums on the exchange rates on offer to see what the cost would be. Bitcoin transactions often take minutes rather than seconds, so the chance of something bad happening is greatly reduced, although never totally eliminated. Although the bitcoin transfer itself is relatively quick, the cash-in and cash-out process can take days, depending on the policies and health of the exchanges. Remember all the people who got burned by Mt Gox suspending cash-outs while it went bust. – pinoyyid Apr 24 '14 at 15:24
  • When you say "of course it won't happen in practice" - what do you mean exactly? Tax consideration is a critical one - tax fraud has no statute of limitation. – littleadv Apr 24 '14 at 16:12
  • the decision by the Fed was only taken recently and the IRS hasn't yet taken on board the implications. The taxable value of bitcoin profits isn't big enough for them to worry about the mechanics of how they would go about quantifying the profit and identifying the individuals. So you can sleep with a clear conscience for the next few years at least. There will be high profile cases against the speculators like the Winkelvae long before Uncle Sam comes looking for you. You will pop up on the NSA's radar before the IRS notice you. – pinoyyid Apr 24 '14 at 16:51
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It's unlikely to be helpful for your remittances from USD to ILS (Shekels) to go via a third currency, or via a commodity (Bitcoins have elements of both). It could easily end up being two lots of fees and currency losses, as well as the volatility risk.

You'd probably need two BTC accounts (one for each country, because of know-your-customer rules). You still have to get the money from your USD account to the first BTC account (which may involve fees), exchange (which will involve fees or currency losses), then exchange again, and pay out to the ILS account (which probably has fees). Realistically, this is little different than going via Gold or Silver (although likely a smaller buy/sell spread), or a volatile third currency.

The simplest answer to your problem is to transfer less often (and perhaps also use a third party currency broker to get a better exchange rate, which should cover the transfer costs). Try to ensure you have enough float in ILS to only need to do a transfer every 3-6 months.

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