Bitcoin Tracker: The Unbanked-Profit Dilemma

Can bitcoin be a way to financial inclusion? Perhaps only if the banks are on board and the infrastructure can reach the poorer populations. This week’s news for bitcoin highlights some activities that are targeting the unbanked in developing economies and one that hopes to elude the KGB.

Can the unbanked benefit from bitcoin, or are they merely the experimental subjects of bitcoin adherents, lobbyists and scientists? This week’s Bitcoin Tracker takes a look at the recent bitcoin projects that are in the news and that are targeting the unbanked.


Bitso Eyes The Latin Market

The regulatory framework for bitcoin is a mess in Mexico, as it is in most countries, but Bitso, a bitcoin exchange startup, sees a future in Mexico and Latin America. Daniel Vogel, cofounder and president of Bitso, told CoinDesk: "There are some places where there's been a significant amount of bitcoin activity in Latin America, but there are other places that are very, very quiet. I think those places are very interesting."

Bitso was founded in 2014, and the startup has just raised $2.5 million from investors, such as Monex Group, which conducted $160 billion in transactions last year in Europe, Latin America and the U.S.

The users of the exchange, however, do not appear to be the power brokers of the world, or even Latin America. Vogel said few users are making speculative investments, and most use accounts to pay for online games or as a P2P lending platform. "We almost have no speculative players in our exchange. Most of what we see are people who are using this technology to achieve something."

For its part, Bitso wants to help the unbanked. Mexico's National Institute of Statistics (INEGI) reports that only around 44 percent of its people have a bank account. That leaves over 50 percent that Bitso could potentially serve. Vogel also wanted to clarify regulations surrounding bitcoin. The Mexican government has implied that bitcoin is subject to many of the same restrictions as cash and precious metals, and a 2014 report suggested that the Mexican government might restrict banks from using bitcoin.

While Bitso wants to help the unbanked, how they’re going to do so is unclear. Still, we do know that the new investment will be spent on establishing the company in Mexico, where Bitso currently has 20,000 customers and processes $2.5 million worth of transactions a week, according to Vogel.


Needham Vs. Nasdaq

The price of bitcoin has been hovering around $600 for the past couple of weeks, but a report by Needham predicts it could reach $848 in the near future. Of course, this isn’t the first prophecy of its kind.

The prognostication is based on conjecture largely and what might soon happen with the cryptocurrency. According to NewsBTC: “One glance at the report and it is quite evident that the digital currency is right on track.”

Let’s take a quick peek, shall we?

The report finds that the rate of bitcoin adoption has exceeded expectations, and increasing demand has upped the price projections. But this conflicts with a report by Nasdaq, which stated: “Yet, nearly eight years after its creation, bitcoin remains little more than a toy for geeks and a source of gossip and controversy for FinTech journalists. Bitcoin — despite all its promise and media coverage — has yet to gain widespread adoption.”

Harsh words.

The Needham report delves into the problems of scalability facing the digital currency, suggesting that introducing second-layer technologies is preferable to implementing a hard fork to increase the block size. But the Nasdaq report states that bitcoin’s adoption is stalling because its “backroom programmers and cryptographers” lack a basic understanding of the payments industry.

In its less scathing assessment of bitcoin, the Nasdaq conceded that bitcoin can be fixed and used Dash, termed “the better bitcoin,” as an example of a digital currency that has incorporated payments industry and design experts into its development.

“By injecting payments industry know-how, it is yet feasible that another digital currency, such as Dash, may surpass the early success of bitcoin and turn the promises of digital currency into reality.”


From Caucuses To Cafes

Following the passing of a nonbinding resolution asking the government to establish a national policy for technology, Capitol Hill is laying the red carpet in anticipation of bitcoin’s arrival. American Banker reported on Sept. 26 that a Congressional Blockchain Caucus is educating lawmakers on the payments technology.

The caucus is headed by two representatives across the aisle: Rep. Jared Polis (D-CO) and Rep. Mick Mulvaney (R-SC). According to Polis: "It's vital for Americans, businesses, and members of Congress to learn about blockchain technology so the U.S. can continue to secure its stance as the global leader of ingenuity.”

But while U.S. politicians may reach bipartisan agreement on bitcoin, they rarely agree with their Russian counterparts, and the Russian government doesn’t seem to be hitting the breaks on bitcoin, either.

A cafe in the Moscow headquarters of Russia’s largest state-owned bank, Sberbank, is officially accepting bitcoin payments, despite the confusion about the legality of the digital currency.

Roskomnadzor, the Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications of Russia, banned P2P bitcoin trading platform Localbitcoins on Sept. 13, and the legality of bitcoin in Russia became, once again, unclear.

However, the owner of a cafe that serves within the bank headquarters decided to accept bitcoin after finding it more efficient than cash or credit cards. According to the co-owner, who is a law graduate, because the transaction is directly between the customer and himself, no law prohibits his purchase of bitcoin as an individual. However, the cafe has also avoided a PoS system because it might be illegal for a business to accept bitcoin.

Let’s hope the KGB doesn’t catch on soon, or the regulations may change once again.


Bitcoin Accelerates Africa

A project in Zimbabwe might soon shed some light on whether bitcoin can help the underbanked. Bitmari, a bitcoin startup and accelerator for women farmers in Africa, is giving Zimbabwean women farmers bitcoin, which they can use to buy goods at suppliers.

According to BitMari CEO Sinclair Skinner, bitcoin can help the women because “none of the current methods of financial transactions that many of the unbanked farmers use have the power of bitcoin.”

The program hopes to raise $22,500 for 100 women farmers, and 10 farmers in each of Zimbabwe’s 10 provinces will receive bitcoin on their free BitMari wallets. The crowdfunding project also eliminates the need for large NGO bureaucracies to facilitate aid.

Also in Africa, this time in South Africa, Werner van Rooyen, head of business development and growth at Bitx, was bullish about bitcoin’s potential and future in the emerging continent. Bitx is the biggest bitcoin exchange in South Africa, so bear in mind the perspective of van Rooyen, who talked to CoinTelegraph.

Van Rooyen accredited the adoption of bitcoin in South Africa to the willingness of investors to include bitcoin in their portfolios, an increasing number of merchants online and offline who are accepting bitcoin, established financial services and the availability of Wi-Fi and mobile.

So, can attempts by developing nations such as South Africa and companies such as Bitso and BitMari make a difference to those excluded from financial services? According to New School professor Lisa Servon, one reason low-income populations choose not to use traditional banks is to have quick access to money. Banks are not interested in reaching low-income areas with small populations.

But she sees bitcoin growing as banks become more interested in digital currencies. “It will take a long time before the truly poor will even know about bitcoin … but to focus on the unbanked does nothing to interest big banks ... It will take time for the true promise of bitcoin to express itself. When that happens, we will see an engine of change that will rival the internet in power and reach.”

And there’s the answer. Some think that bitcoin does have potential to help the financially excluded, but as with all things financial, it depends on whether the big banks and private companies can make doing so lucrative.



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