Bitcoin may have changed the Internet, but could it impact change upon world payments?
When we think of Bitcoin and bitcoins many roll their eyes with derision, especially if they work in the payments industry and lack a forward-thinking attitude. In some cases it’s true, Bitcoin isn’t having the impact that you’d traditionally hope it would have in tech-savvy nations like North America, United Kingdom, Netherlands, etc.. However, casting our gaze to other areas of the world shows that it’s having a far bigger influence in areas that traditionally don’t have the remit to adopt technology quite as quickly.
Perhaps Bitcoin and the wider cryptocurrency space is perfect for emerging markets like Africa, Asia and Eastern Europe? That certainly seems to be the picture that’s being panted by those in the business during a talk on global perspective at Bitcoin Finance 2014 in Dublin last week.
CEO of Chinese exchange BTC China, Bobby Lee, started the discussion by highlighting the Bitcoin situation in China. As we know, the communist nation has announced its stance on the cryptocurrency, finding it dangerous due to its investment potential and volatility, but it didn’t always used to be this way. Lee says that for the first few years of Bitcoin’s existence in the nation the government just ignored it, shrugging it off. It wasn’t until it began to have an impact that they stepped in and denounced it as a viable currency. Naturally, that scared many off, but the Chinese government does recognise it as a commodity and hasn’t shut down exchanges in the region – although life was a little bit tougher for them right after the announcement.
The picture in Russia, however, is somewhat darker. Ocean Bank VP, Oleg Pokrovsky enlightened us around how the Russian government went from having no issues around Bitcoin to a full-on clampdown on any cryptocurrency activity within the nation. Due to a terrorist attack that hit Volvograd, the Russian government came in and ruled out any anonymous P2P payments – deeming them all as terrorist activity, and essentially outlawing any use of crypto protocols in transaction. Pokrovsky points out that the government didn’t have any time to even think about what Bitcoin is, they didn’t even mention it specifically in the law, yet it was clear from the central bank’s letters that they were included in the new terms. However, there is a chance things could change as it seems that the central bank does have an interest in the applications of cryptocurrencies, for now though, it’s completely outlawed.
In a region like the Netherlands you’d imagine it to be widely adopted and liked, but it seems that it’s facing resistance there too. Bitonic COO Pieterjan Goppel explained that the Netherlands has both a positive and a negative outlook on the digital currency. The state warns people about the impact investing in it could have, yet they continually attend conferences and events – wanting to find out more about the network and what it offers. It also seems that a lot of commercial banks really want to see what’s going on in the space. And, while they can’t regulate the Bitcoin networks, they can actually regulate the commercial banks who are tempted to adopt the technology – in fact, they can force it on them if they’re a bank or an exchange.
However, it seems that Kenya is the most promising market for Bitcoin adoption and for companies looking to jump into the space. BitPesa‘s head of trading and risk, Amy Ludlum, says that so far the South African government is the only nation in Africa to have had a stance on the whole thing, and even then they’ve only said “we’ll see.” Obviously that could raise concerns for adoption in the continent, but in fact it’s an entirely blank slate out there. The success of Safaricom’s M-Pesa mobile payments platform has meant that the adoption of something as simple as BitPesa is great. The people see it as advantageous as it completely cuts out the banks from the equation, and over there the banks are incredibly corrupt and the financial system takes far too long for anything useful to happen. The banks do seem interested in adopting Bitcoin, but currently it’s the people on the ground who are most interested in its applications for sending and receiving money – largely remittances or for future investment.
But what about global regulation for cryptocurrencies? Could it ever come into being? Would it even work?
Blockchain.info CEO Nicolas Cary sums things up perfectly, stating that “finance is highly regulated because money makes people do bad things.” So far Texas, New York, and California will be the first US states to bring in any regulation around Bitcoin, because they’re the main states that participate in it in the US. It’s not for certain that this’ll happen, but if anything is going to come about it’ll take place there first – rather than on a federal level. That said, this isn’t just a US phenomenon, so you can’t expect everything to happen in the US first. However, Bobby Lee believes that most nations – especially China – will wait and see what the US does before they decide to bring in any type of regulation.
All this information is all well and good, but how are people actually using bitcoins?
China seems to be buying the digital currency because of speculation instead of spending, typically holding on to their money for a reasonable length of time, but in the Netherlands it’s seen as “gold 2.0.” Goppel has observed that while people are interested in seeing what Bitcoin is all about, they typically only buy a digital handful and then mess around with them, they really don’t buy a lot at a time – but it seems that the lack of banking involvement is actually a plus point for many users.
Of course, things are different in Kenya and Russia. Russians really aren’t doing anything with Bitcoin or crypto at the moment because they really can’t. However, it was previously used for settlements instead of investing, and they enjoyed the anonymity and lack of government involvement that came with it. In Kenya investing is the last thing on anyone’s mind, in fact, they don’t really care that it’s Bitcoin. Instead they enjoy the ease and immediacy of payments that can be sent and received. Banking by mobile with M-Pesa feels natural to them, so using something like BitPesa also feels easy and accessible too.
Currently there’s little interest in China in restricting Bitcoin, say in the same way as ‘the Great Firewall of China’. Lee attributes this to the fact that there’s always a way around restrictions on something like this, and that thanks to China’s great eCommerce systems Bitcoin isn’t actually a great alternative for many consumers or merchants – fees are already absurdly low compared to other developed nations, and transactions happen quickly.
So where is the explosion likely to hit first then?
Well, despite the growth in merchant education and college education on what Bitcoin and the blockchain is it seems that a lot of people believe that the biggest impact will take place in developing nations. While, as Ludlum points out, Kenya struggles in educating users through digital channels about the benefits of Bitcoin, people in the region just seem to get it. They understand how it benefits their lives and then they decide that they want to use it.
The west are interested in the technology behind Bitcoin more than the actual currency, while in these developing nations they just want to use it – they see value in its day to day uses. Still, there’s a lot of work to be done to help facilitate this growth, and Cary believes that most of this is because a lot of documentation online is in English, when – in reality – it needs to be far more universal.