In 2021, Bitcoin has become mainstream. Wall Street is focused on the world of crypto, with well-known investors such as hedge investor Paul Tudor Jones leading the group; The Economist go from calling cryptocurrency “Useless” in 2018 argues that it belongs in most portfolios; Technology executives Jack Dorsey and Elon Musk overcame any notion of Bitcoin’s value at a conference run by an asset management company. Popular opinion is a bit late: Many people still believe that cryptocurrency is a massive, global get-rich-quick scheme. Others simply dismiss the whole thing as a speculative fad at best, a criminal enterprise at worst. But amid the noise, enthusiasm, and hype, we can lose sight of the most important story: how cryptocurrencies are changing lives in the developing world.
Take, for example, Cuba, a country where Internet penetration has increased from less than 40% in 2015 to an estimated 70 to 80% today. Like most people, Cubans want to buy and sell things online – but, unlike most people, they can’t buy anything online with a debit or credit card. Due to US sanctions, ordinary Cubans find themselves cut off from the global financial system: They can’t start signing up for Spotify, buy a domain name, or pay for website hosting with a card . This means that if Cubans want to engage in online commerce, especially with another country, they must use cryptocurrencies. And where there is a need, there will be a way. Cubans have found solutions like Bitrefill, a website that sells gift cards from Spotify and other companies for cryptocurrency. Data from Bitrefill as of June 2021 shows that four times more people buy Cuban digital products (such as Cubacel phone top-up products) with crypto than buying products similar to that of the United States, on a population-adjusted basis. Cryptocurrencies have penetrated so deeply into the country that the Communist Party of Cuba, a conservative Marxist organization not known for its technological savvy, instructed the Central Bank of Cuba regulation of the use of electronic money and to study how they can be used to help the government avoid US sanctions. Paradoxically, officials in the US State Department are rumored to be looking into how cryptocurrencies could be used to set up remittance networks to bypass the huge taxes levied by the Cuban government. .
While crypto adoption in Cuba is a phenomenon from the bottom, in El Salvador Bitcoin has been announced as legal tender of the country’s controversial president, Nayib Bukele. President Bukele stated that the government-sponsored Bitcoin wallet already has more users than the entire Salvadoran banking system, potentially giving life to thousands of unbanked individuals. These Bitcoin wallets operate in part on the Lightning network, a system that allows for cheaper and faster cryptocurrency transactions. Now that you can pay instantly with Bitcoin at every McDonald’s and Starbucks in Salvador, this certainly sounds futuristic and exciting. However, Bukele is still accused of having committed a reckless act to turn the country into a paradise for Bitcoin rich entrepreneurs or even outright criminals and polls consistently show the majority of the population Salvador feels nervous about volatile bitcoin pay. Whether Bukele’s crypto game will go down in history as the headshot of a modernist or the madness of an autocrat remains to be seen.
Farther south of Venezuela, Bitcoin is slowly becoming an integral part of the economy. Due to currency controls, Venezuela’s banks are not connected to the rest of the world, and thus Bitcoin is used to transfer value in and out of the country using peer-to-peer markets where everyone people can easily exchange Bitcoin for cash. The impact of these markets was demonstrated by a natural experiment in 2019, when there was a massive blackout in Venezuela, Bitcoin trading volumes across the entire Latin America dropped dramatically. Today, the peer-to-peer cryptocurrency market is widely acknowledged as an important component of the Venezuelan foreign exchange market.
But the real leader in Bitcoin trading is not Latin America, but sub-Saharan Africa. UsefulTulips, a worldwide peer-to-peer Bitcoin transaction tracking website, currently reports that trading volumes in Sub-Saharan Africa are now equal to those in North America and will soon surpass them. Observable volume is at $20 million a day, but the real numbers could be multiples higher. In countries like Nigeria, governments have imposed strict capital controls, and moving value across borders can be impossible. No wonder people in Africa are increasingly using cryptocurrencies for international transactions.
