Bitcoin: On the verge of mass adoption.Elena Obkhova


Q&A with FAS founder and CEO Elena Obukhova | Fintech Advisory Services

Following me on “Bitcoin as legal tender: what does this mean for all of us?“I was asked multiple questions, and I decided to discuss them below and explain why countries are eager to adopt Bitcoin as legal tender.

What are the reasons for the adoption of Bitcoin as legal tender in Latin America? Why is this area?

Latin America is a very special region. Most countries have experienced many severe financial and political crises, and the government has failed to help the people. Different regulations and restrictions on foreign currencies, especially the U.S. dollar, have led to the rise of a “cash economy”.Bitcoin as legal tender: what does this mean for all of us?“People find that cryptocurrencies, especially Bitcoin, are the only way to protect their savings from inflation and unwelcome government actions.

To answer this question, Bitcoin is already part of the cash economy and widely used by people in Latin America, and now the government is introducing it into the public sector. Countries that have failed to maintain and “save” their national currencies from rising inflation can now adopt currencies that do not depend on local politics. For example, El Salvador has used the U.S. dollar as its national currency. However, the U.S. dollar does not meet the needs of underserved people, such as remittances. The remittance market in Latin America is huge. Compared with traditional remittance methods, cryptocurrencies allow remittances with lower commissions.

After getting acquainted with the local market, the current efforts to introduce Bitcoin as fiat currency seem to be very logical. Latin America is already the leading region for Bitcoin adoption, it is widely used, and it has only become official.

This adoption is caused by numerous crises and political actions. For example, Mexico banned U.S. dollar accounts and the conversion of funds into pesos in 1982, causing account holders to immediately lose 30% due to currency exchange. People are forced to fall into such a loss, which still remains in their memory.

In addition to protecting funds from inflation, Bitcoin has opened up new horizons for people without bank accounts, because now they can easily use digital currencies instead of cash for transactions. It also allows access to other financial products, such as savings and loans that people without a bank account cannot use.

Local businesses also use Bitcoin and other cryptocurrencies in overseas and internal transactions. Commissions are much lower and transactions are much faster than banks, especially overseas transfers. Some countries have many restrictions and uncertain regulations on cross-border payments, which brings a lot of additional troubles to companies because they simply cannot settle with buyers, sellers or partners. Cryptocurrency solves this problem and helps companies easily trade with each other.

How does Bitcoin as a legal tender change for local businesses?

I have briefly mentioned how local businesses in Latin America can benefit from Bitcoin. Using Bitcoin as legal tender makes all these transactions completely legal and formal. It also provides the same seamless opportunity for other companies that were previously unable to conduct unofficial transactions and had to deal with large commissions, delays, and the nightmare of cross-border payment regulation.

Compared with the additional complexity brought by bank cards, you also don’t need a special POS to accept Bitcoin in your local store. Therefore, regardless of gender, race, financial status, residential status, and any other circumstances, everyone can now pay and get paid in Bitcoin.

For local shops in dangerous areas, there is no need to worry about sending cash away every day or even several times a day to avoid robbery. They can now store funds digitally with additional and simple security to avoid such incidents.

If it is assumed that developed countries adopt Bitcoin as legal tender, there will be some big changes in local companies. Have you tried opening a business account? This may be easy for some people, and an absolute nightmare for others. Neobanks partly joined the game to change the rules, but there are still many unfavorable factors for local companies that cannot be eliminated, such as commissions, transaction speed (wire transfer), conversion and exchange fees, POS, etc. Borrowing as a business (even small loans) can also be a challenge. Cryptocurrency is meeting these needs.

Which countries can we expect? why?

I have always said that Latin America will become a region that will further promote the mass adoption of Bitcoin. I also said that in general, developing markets can easily catch up and join quickly. We see that Paraguay, Panama and Tanzania plan to join El Salvador. Mexico has also gained more cryptocurrency-friendly supporters in the government. However, after the controversial FinTech Act of 2018, I don’t think Mexico will adopt Bitcoin as quickly as other countries in Latin America. Argentina would benefit from implementing such a law, and there are rumors that it will actually be considered. In particular, considering how big the Bitcoin OTC market in Argentina is.

Africa is not surprising either. I was already in “Bitcoin as legal tender: what does this mean for all of us?“For example, Nigeria provides very interesting cash-based financial products for underserved people. However, cash has its limitations and takes longer. Cryptocurrency brings more convenience and financial inclusion to the community.

Personally, I believe mass adoption is just around the corner. If we allow developing countries to adopt Bitcoin as legal tender, then it is necessary for developed countries to follow suit. When? It is still uncertain, but the speed at which other countries discuss and join El Salvador is staggering.

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