Bitcoin is gradually making progress as a medium of exchange in developing countries. While it can be volatile as an investment asset, it has real utility as an instrument for payment and money transfer, especially in places where conventional payment systems are immature. Because Bitcoin facilitates instant payment through peer-to-peer technology, most transactions can be completed in less than 10 minutes no matter how distant the two parties are. In addition, each transaction is recorded in a public ledger, enhancing transparency and trustworthiness.
Consequently, a supportive ecosystem is quickly evolving around the digital currency. Companies—mostly startups—are building exchanges, trading and payment platforms, wallets, and storage and remittance services. There are now around 65,000 bitcoin transactions a day currently, and 13 million bitcoins are in circulation globally. (That converts to about $8 billion at a recent USD/BTC exchange rate of $589/BTC). But bitcoin’s ability to scale further hinges on consumer confidence and the development of services that allow users to securely store and transact in bitcoins.
To be sure, consumers are increasingly familiar with many of the concepts behind bitcoin in emerging markets like parts of Africa, where alternative cashless payment solutions like M-Pesa’s mobile money are already popular. A recent survey by mobile payment company Jana found that over half of respondents from Asia and Africa expressed confidence in investing in bitcoin. Consumer confidence is especially high in Kenya, home of M-Pesa, and 74 percent of Kenyan respondents said they would feel comfortable investing in digital currency.
A number of intriguing startups in Asia and Africa are offering various bitcoin-related services. Below are a few notable examples:
The first live bitcoin exchange in the world, Vietnam’s VBTC, offers trading services, multisignature wallets (used to reduce the possibility of fraud by employing several private keys), and bitcoin storage. The firm’s founder says that Vietnam’s high inflation rate makes bitcoin an attractive alternative to the national currency. While local regulators have issued warnings about bitcoin risks, VBTC is bullish on the digital currency’s potential in Southeast Asia and beyond.
In neighboring China, BTC China is one of the world’s largest exchanges for the digital currency. In addition to providing trading and exchange services, BTC China offers a wallet app, Picasso, which enables users to sell bitcoins by pushing a few buttons. But Chinese regulators are as leery of bitcoin as their Vietnam counterparts: China’s Central Bank has restricted the transfer of bitcoins in China.
According to the World Bank, remittance flow, or the amount of money sent back to their home country by global economic emigrants, reached $414 billion in 2013 and is expected to grow to $540 billion by 2016. As bitcoins become easier to acquire in developed countries where remittance flow originates, bitcoin startups can offer the migrant population international transfer at a significant discount to traditional providers like banks and Western Union. Bitcoin remittance can be verified, settled, and signed off on for free in a few minutes, making the transfer efficient. Kenya-based startup Bitpesa, which serves the African diaspora in the UK and aims to expand to other African countries, currently offers remittance service at only 3 percent per transaction. By contrast, Western Union and banks often charge transfer fees of between 9 and 20 percent. PayPal, a popular inexpensive transfer method in developed countries, is not available in Kenya.
Payment and Wallet Services
BitPago, a bitcoin payment startup targeting Latin America, charges 5 percent to process credit card transactions and handles bitcoins for free for hotels and hostels. Based in Argentina, the founder, Sebastian Serrano, was inspired by hyperinflation and the economic damages that currency volatility has caused there. Another LATAM start-up, Moneero, allows users to manage accounts and sub-accounts in bitcoins. Moneero also provides secure wallet services, Moneero Social and Moneero SMS, which allow users to transfer bitcoins through both mobile and social media.
Users in developed markets still account for the majority of bitcoin transactions, but penetration is increasing in emerging markets. While the U.S. dollar accounts for approximately 80 percent of bitcoin trading volume, trading volume in China grew from 0.4 percent in 2012 to 4.7 percent in 2014. One of the most popular bitcoin exchanges, BTC-e, is based in Bulgaria.
As the bitcoin ecosystem continues to expand, emerging-markets startups are gaining the attention of venture capitalists from the developed world. BitPago has raised $600,000 from investors including Boost Bitcoin Fund and Pantera Capital, while BTC China has raised $5 million in Series A funding.
Much like the development of mobile money in Africa, emerging markets present incubation and growth opportunities. There’s a consumer appetite for alternate currency in these places where inefficient financial systems often levy high service fees for both individual customers and small businesses. In Latin America, Asia, and Africa, bitcoin use will just keep going up.
Min-Si Wang contribues on topics relating to finance and e-commerce for Techonomy. She currently works in tech M&A as a consultant, and has experiences in international development for Planet Finance and the Clinton Foundation.