Let’s Help Emerging Markets Show Bitcoin’s Value To The World

For the average citizen of a developed country, Bitcoin offers many advantages over fiat money. But for an average citizen in an emerging economy, Bitcoin represents more than an alternative to traditional finances: it is a new horizon of economic freedom.

A massive market downturn of the digital asset from an all-time-high close to $20,00 in late 2017 has spawned waves of mainstream media coverage about an ecosystem plagued by scandal and excess.

The 80 percent price drop has certainly cooled the Bitcoin frenzy as a speculative asset in rich countries. But beyond the headlines, interest remains strong in regions such as Latin America, sub-Saharan Africa, and Southeast Asia, where the benefits make a compelling case for adoption of digital money that has no central authority backing.

This enthusiasm is evidenced by the solid local volumes of Bitcoin trade. Despite bear market prices, from Mexico to Brazil, Nigeria to South Africa, emerging markets have contributed to the global rebound over the last year of Bitcoin’s steadily increasing usage and transaction rates.

Brazil’s biggest independent brokerage, Grupo XP, officially joined the digital asset sphere late last year, acknowledging that around 3 million Brazilians have exposure to Bitcoin, compared with only 600,000 that invest in stocks. In Mexico, digital asset exchange Bitso said 800,000 Mexicans now actively trade in bitcoin helping its own annual growth to a staggering 522 percent.

Another powerful sign of emerging market interest is the fast proliferation of Bitcoin ATMs. Colombia alone has more than 30 active Bitcoin ATMs, a similar number to the major developed economy of Italy, according to Coin ATM Radar, which tracks the industry’s global expansion.

And even more significant, use cases from retailers to e-commerce are growing in these regions, paving the way for natural demand to drive widespread Bitcoin adoption. Starting last month, for example, Argentines have been able to use bitcoin at 37 locations to pay for rides on buses, subways, trains, and at highway toll booths.

Bitcoin solution for cash-intensive regions

The need for Bitcoin as an alternative to traditional finance is acute in cash-intensive regions, where more than a third of Africans and Latin Americans do not have a bank account, according to the World Bank. These citizens also need a hedge to protect against financial risk after witnessing the impact of irresponsible monetary policies that have resulted in a long record of high inflation and devaluations.

Millions have migrated to the United States or Europe, and pay steep fees to send money back home to help their families survive. That is why this interest in alternatives such as Bitcoin is a potential turning point for Latin America and other countries in emerging markets, such as South Africa, which share some common financial inclusion challenges and economic risks. South Africa is the top country for digital asset ownership, with more than 10 percent of internet users possessing some, according to the Global Digital Report 2019 by social media management company Hootsuite.

Some of the biggest global players in the digital asset industry have also noticed the potential. Coinbase, one of the world’s biggest digital asset exchanges, is “actively exploring” countries in Latin America, Africa, and Southeast Asia for the next growth leg in the industry. Binance, one of Asia’s exchange heavyweights, is also pondering new options in emerging markets, according to media reports.

“Use cases in developed markets will be different to those in emerging markets as the US and Europe have a fairly well-developed financial system,” said Dan Romero, a Coinbase vice president focused on international expansion.

Education, regulation, and liquidity

But we need to nurture these encouraging early adoption signs. To fully unleash Bitcoin’s potential in crisis-prone countries, we have to keep working on three key areas.

First, we need to educate authorities, companies, and citizens about how Bitcoin trading works and benefits their societies. A growing number of digital asset companies and associations, many of them with links to local governments, are making progress in this regard as educational resources and venues swell.

We must also support the development of clear regulation that opens the door for institutional investors and wards off bad actors. And here, there are many examples from smaller countries, such as Singapore, that emerging markets can emulate to engage in “regulatory approval” as opposed to “regulatory restriction.” Singapore’s pro-Bitcoin stance and regulation clarity have attracted more than 20 digital asset exchanges with over $3.9 billion in daily trading volume.

Last, but not least, we need companies to believe in Bitcoin’s potential in emerging countries and work to provide the much-needed market structure to propel their markets. Education and regulation will have little impact if the system is not ready to meet demand from the regions’ new adopters.

By doing all this, the digital asset industry will find in developing markets more than just a shortcut to delivering higher asset prices. The industry can lay the foundation for a game-changing adoption that will foster financial inclusion and create opportunities for millions of people. And that will clearly demonstrate to the world the essential value of Bitcoin.

Josiah Hernandez is the Co-Founder and Chief Investment Officer of Satoshi Capital (satoshi.capital), a digital asset-focused fund.