Bitcoin has become the preferred way for residents of failing economies to transfer money without dealing with banks
New York: About a third of the customers queuing at La Maison du Bitcoin’s teller windows in Paris aren’t speculating on the value of the cryptocurrency. They’re sending digital money home to Africa. “In many countries in Africa, there are far more cellphones than bank accounts,” said La Maison co-founder Manuel Valente. “For bitcoin, all you need is a phone.”
Zimbabwe, where the price of bitcoin spiked to double the international rate after this week’s military takeover, shows Jamie Dimon, Axel Weber and other cryptocurrency skeptics where the real-world use of bitcoin, and possibly its future, lies.
It’s becoming the preferred way for residents of failing economies to transfer money without dealing with banks, protecting their savings from political turmoil, and avoiding the local currency when its value declines due to inflation.
There’s no data on how much digital money leaves industrialized nations for the developing world. Part of the allure of electronic cash is the ability to transfer it anonymously. But as events in Zimbabwe have confirmed, bitcoin, the world’s most popular cryptocurrency, is most attractive when confidence in institutions falls.
“Bitcoin is a safe haven for people around the world who don’t trust their governments,” said Andrew Milne, chief investment officer and co-founder of Altana Digital Currency Fund, a $22 million hedge fund that invests in cryptocurrency assets. “There are many countries where people are looking for an asset that isn’t vulnerable to banks blowing themselves up.’’
Zimbabwe gave up its own currency in 2009, the same year bitcoin was born, after hyperinflation led to the printing of a 100 trillion Zimbabwean dollar note. The country uses the US dollar, South African rand and digital money.
People buy and sell bitcoins on a secure peer-to-peer network that doesn’t rely on any government or central bank.
Trying to control it is “like trying to catch water”, said Alex Tapscott, chief executive officer of NextBlock Global Ltd., a venture-capital firm that invests in start-ups involved in blockchain, the shared digital ledger that records transactions made with cryptocurrency.
Leaders of three of the world’s biggest banks have expressed skepticism about the stability and endurance of bitcoin.
In September, JPMorgan Chase and Co. CEO Dimon threatened to fire any JPMorgan trader foolish enough to bet on it. Weber, who leads UBS Group AG, said last month that bitcoin has no intrinsic value because nothing backs it. Earlier this month, Credit Suisse Group AG CEO Tidjane Thiam said that “the only reason today to buy or sell bitcoin is to make money, which is the very definition of speculation and the very definition of a bubble”.
Residents, especially, of Zimbabwe and Venezuela, where the annual accumulated inflation rate is 825%, might disagree.
In Africa, converting bitcoin to the local currency is often handled by local entrepreneurs, either with licensed change points similar to Paris’s La Maison du Bitcoin or, on a smaller scale, an individual with a mobile phone and a pocket of cash, Valente said.
“It’s like a walking exchange point,” Valente said. “It’s very decentralized.” Buying goods and services with cryptocurrency is still difficult to do, but Valente said he’s heard of shops accepting bitcoin opening in many African countries.
Entrepreneurs have started companies intended to serve bigger markets. BitPesa Ltd., a Kenya-based start-up, provides international money transfers and other services in bitcoin in Nigeria, Tanzania, Uganda and its own country. Unocoin does the same in India, as does Coins.PH in the Philippines.
Back in Paris, a few blocks from La Maison du Bitcoin is Passage du Grand Cerf, a covered street of shops. They all display a sticker on their windows declaring “We Accept Bitcoin”. The stores sell everything from antiques to designer clothing. Most proprietors said they’ve averaged a few transactions a month in bitcoin, frequently to Africans.
“We’ve made about 20 or more sales in bitcoin in the past year,” said Yann Robert, who runs a designer clothing store. “The buyers are usually from Africa, a few from Asia—China, Japan. And they’re very happy, because not that many stores accept bitcoin.”