The ExitEvent team is reporting live from the Cryptolina Bitcoin Expo in downtown Raleigh. Read our preview of the event here.
Here are excerpts from today’s first panel discussion on Bitcoin’s role in aiding developing nations and their people.
Speakers: Greg Simon, Moderator / Elizabeth Ploshay, Bitcoin Foundation / Matthew Keneham, Bitcoin Society / Sean Dennis, Ribbit.me
Greg Simon, originally from Nebraska, spent 12 years in banking but left in 2012 due to personal issues with industry. Switched to Bitcoin, what he calls the “right team”, to develop a solution to some of those problems. Involved with a number of different projects and owns two for-profit companies. He’s also a founding member of Bitcoin Association – distributed autonomous association.
Matt Kenehan, founder of the Bitcoin Society. Recent college graduate but has been involved for a couple years. The ability to develop philanthropic platforms was an attraction to Bitcoin – the ability to send money instantly across borders.
Sean Dennis is founder of Ribbit.me (based in Nicaragua).
Q: What are the needs in the developing world for this technology? How can people benefit?
Matt: Two thirds of the world is considered unbanked – no access due to infrastructure or simply can’t afford it. Bitcoin provides a way to become your own bank and internalize your finances. If you don’t have that kind of financial empowerment, you don’t have access to other financial tools like credit, loans, etc. A tool for financial advancement.
Sean: A lot of friends work in the U.S. and send money to Nicaragua; they use Western Union which charges a 15-20% fee. A system that lets people use Bitcoin instead of Western Union would be quite valuable – it can change the financial metrics of their business. 82% of Nicaragua is unbanked. Half the country is inaccessible to roads, so money isn’t in banks. All cash model, but everyone has a smartphone. Even people earning $150 a month have smartphones. Transferring bitcoin with SMS will be a big help. Transaction fees so low that mass acceptance could really, really help these countries.
Elizabeth: The biggest thing is statistics showing that there are more people with mobile and smartphones than with clean and running water. Tons of women don’t have the privilege of banking. The Women’s Annex Foundation is accepting donations in BTC and paying women in BTC in Afghanistan. This is their only opportunity to participate in the global economy because otherwise, they would need a male friend to let them open an account or have access to their own money.
Q: What can they do with a bitcoin on their phone once they receive it?
Elizabeth: This is definitely a big issue. 37coins is working on mobile payments, and other systems are emerging in Kenya and Botswana. (She wonders if Bitcoin will leapfrog banking in other countries that don’t have the established banking infrastructure.)
Sean: People are frustrated with fluctuation of value in currency, so local people developed a phone credit that they could transfer. Five or six townships managed to make it work where they never translate the phone currency into local currency – they use phone currency only. That’s what a lot of people like about crypto currency – taking the government and players like Western Union out. If you give someone a bitcoin in another country and they can’t spend it, there’s no value. This needs to be solved. A local bitcoin miner is trying to install POS systems for merchants, provided they agree to accept bitcoin. Lawyers and some hotels and shops are agreeing to accept bitcoin.
Matt: Improving on platforms to facilitate acceptance and payments is critical. Local efforts are happening and they need support from people outside the area.
Q: Why can’t we used a dollar-backed currency for transmitting value?
Matt: One thing holding back some groups is this issue. There need to be on-the-ground ATMs where you can cash out mobile currency.
Elizabeth: Already, there are ATMs being taken to some places like Botswana. But why would we do something in between? Might as well focus on bitcoin currency and help people transmit Bitcoin as local currency. A woman in Botswana learned about Bitcoin when her son was sick (she thought she’d invest to afford his surgery) – he passed away but she continued to learn about Bitcoin, has purchased some coins and is now focused on getting charities in Botswana to accept donations in Bitcoin.
Greg: My wife and I sponsored a girl in Nepal and had been donating in dollars – every time we sent money, they had to go through a lot of local controls. I was able to find the organization in Kathmandu, explained it and now they accept Bitcoin.
Sean: These countries have highly volatile currencies, so ideally, they don’t have to cash out and can just pay for items in Bitcoin.
Elizabeth: Some women in Afghanistan can use the money online for books and other digital content. The ability to raise funds and send overseas, for example for disaster relief, is also something that can be quickly distributed to individuals in need. Its a very effective tool due to low transaction fees.
Q: Why aren’t people adopting Bitcoin as a currency faster?
Elizabeth: It’s happening quickly, but one of the challenges is education. It’s still moving faster than traditional banking. Providing education and resources, possibly even by making donations in Bitcoin, helps move the needle.
Sean: A lot of times you’re dealing with oppressive regimes. You’re taking control away from the local government, so they try to keep the information away from people. Wealthy people in Nicaragua don’t keep their money there – they keep it in Panama. Groups are very interested – they just need to be educated and learn more.
Greg: In countries like Nicaragua where they only bank 15% of their population, they actually see this as a tool to increase their profit base.
Elizabeth: BitPay has local offices in several of these countries and are using these sites as a way to help educate and spread information. It’s an investment opportunity.
Q: How big is the government risk in these areas? Ecuador, for example, banned Bitcoin?
Sean: They can’t control it, so it’s going to be something that the people with money will listen to and the people without much money won’t. By the time people have lost faith in the currency, they typically have lost faith in the government as well. I expect that Ecuador will reverse its position. Government has little ability to restrict usage – positions can hinder it, but in the long term they are ineffective.
Elizabeth: Bitcoin means jobs, financial future, taking opportunities to the next level. Get rid of FUD = fear, uncertainty and doubt. If they’re educated about it, how can they say no?
Matt: Challenge in the U.S. is what information they’re getting.
Q: How quickly do you see Bitcoin overtaking the currencies in these countries?
Matt: It will be a complementary system in the short term. Framing it as a currency to overthrow the current system would be a challenge.
Q: Is there any possibility that introducing Bitcoin to weaker economies could weaken the currency?
Elizabeth: No, the more the merrier. The more businesses, the more countries that use it, the better for the long-term prospects of the currency.
Matt: Comes down to network effects. Its market cap exceeds by far the other cryptocurrency and the more participants, the more stable in aggregate.
Q: Companies like BitPay deal with volatility on the merchant side, what efforts are out there to deal with volatility on the consumer side?
Elizabeth: Price has been pretty stable for the last few months. The more people use it, the more it will remain stable.
Greg: Didn’t get involved until a couple years ago. Upside volatility doesn’t upset anyone, but the downside is the concern.
Elizabeth: Keep in mind this is still a startup space – only around five years. This is an experiment but we really believe it can supplement other systems.
Q: What are other ways people in developing worlds can use this beyond remittances?
Sean: In terms of savings, I wouldn’t necessarily recommend keeping large amounts of money in Bitcoin. They need to be able to spend it as well.
Matt: Ex-pats with families outside the U.S. can use it to send to family outside the country.
Elizabeth: Micro-finance like Kiva – give a loan that might grow in value.
Longer-term vision would be to avoid currency altogether and then directly purchase items or products. Possibly either 3D printing or Drone delivery to order physical items and pay for them and then have them delivered remotely.