Bitcoin’s next big step – Moneyweb


Governments are understandably suspicious of Bitcoin, which has proven relatively immune to censorship and even an outright ban.

A new report from US banking giant Citibank said that despite their fervent desires, it could prove almost impossible for a government to block access to Bitcoin and other cryptocurrencies, or prevent their possession or use, without actually doing so a closure of the global internet ”.

That’s a big tick in favor of Bitcoin as a new form of international money.

Another is its ability to protect purchasing power, which has been adequately demonstrated by the average annual price increase of almost 200% over 12 years.

It took a few years, but a large and growing group of companies are now accepting Bitcoin as a means of payment. According to the city report, titled Bitcoin: At Tipping Point, “A 2020 survey by HSB shows 36% of US small and medium-sized businesses accept bitcoin”.

In October last year, PayPal announced that it would allow US account holders to buy, sell and hold cryptocurrencies, as well as shop with crypto from more than 26 million merchants.

Read: SA firms are starting to invest their money in bitcoin

There are now around 12,000 Bitcoin ATMs worldwide that allow customers to buy Bitcoin with cash or a debit card and sell Bitcoin for cash.

Boom in Africa

A subtle bitcoin boom is also unfolding in Africa, says Citi, fueled by payments from small businesses and remittances from migrant workers home.

According to Chainalysis, sub-$ 10,000 monthly cryptocurrency transfers to and from Africa – typically by individuals and small businesses – increased by more than 55% to $ 316 million in June 2020. All of this became facilitated by an increase in the monthly Bitcoin trading volume of all market participants in South Africa and Nigeria by more than 55% to more than 536 million US dollars in August 2020.

“Many case studies have been conducted showing how Africa has skipped the construction of its financial ecosystem, abandoned the establishment of a robust banking industry and quickly switched to mobile digital wallets instead,” the report said.

Tech-savvy residents are used to digital cash, which positions the region particularly well to consider Bitcoin and other cryptocurrencies.

Difficulty Obtaining US Dollars That de facto Currency of world trade, are aggravated in the region by weak local currencies and complex bureaucracy that makes money transfers difficult. These issues have helped accelerate the drive to research Bitcoin. ”

African traders highlight how Bitcoin helps make their businesses more agile and profitable, and enables African natives who work in countries like Europe and North America to keep more of the revenue they send home. The small cryptocurrency transfers in June 2020 alone rose to 120,000 (+ 55% year-on-year) worth almost 56 million US dollars (+ 50% year-on-year) in June 2020.

When Nigeria was hit by Covid-19 and falling oil revenues, its central bank blocked crypto companies’ access to banking services. The naira was devalued twice in 2020, forcing importers to pay more for ever scarcer US dollars.

“All of these developments underscore how Bitcoin as a payment option is beginning to move towards the mainstream,” says Citi.

“The growing use of both industrialized and emerging countries is helping to cement Bitcoin’s reputation as a store of value and making its censorship-resistant properties increasingly important.”

Read: Cryptocurrency banking potential in Africa

Bitcoin is emerging as a global leveling opportunity, says James Stickland of Elwood Asset Management, and emerging markets have pushed the adoption of digital currencies out of necessity to overcome historical cash challenges.

Another development is the migration of crypto exchanges to banking-like services like lending and lending, using cryptos as collateral. Unlike exchanges where trading stocks require an intermediary, these crypto exchanges provide consumers with direct access to the market around the clock. Institutions and fund managers faced with low or negative interest rate returns on bonds see the crypto market as a potential source of returns, says Citi.

What makes the Bitcoin network unique is that it is the first truly global payment system, says Citi.

“It knows no borders, never closes, does not belong to anyone and is accessible to everyone,” she adds.

“Unlike traditional payment systems that exist on private servers, the Bitcoin blockchain is spread across thousands of machines around the world. Everyone can maintain their own copy of the common ledger. ”

Part of Bitcoin’s appeal is its censorship resistance: the idea that anyone cannot be denied access for any reason. This feature makes the Bitcoin payment network the most universally accessible in the world – for better or for worse.

Financial inclusion

Traditional payment systems such as e-money, credit cards or automated clearing houses (ACH) build on the commercial banking system and are only available to people who meet the strict Know Your Client (KYC) requirements of the financial industry. Such systems lock out significant parts of the world’s population, especially in developing countries. This lack of financial inclusion is increasingly seen as a societal problem, especially now as digitization is limiting the role of cash everywhere.

“The Bitcoin payment system is uniquely resilient. Distribution makes it difficult for a single company or government to interfere in its operations, and censorship resistance makes it virtually impossible to lock out a single group of people.

“The network is also uniquely accurate.

“All of these properties taken together make the Bitcoin network a real offspring of the digital age. There is no planned downtime, no “opening” or “closing”, and no careful coordination. A transaction around the world goes just as smoothly as one across the room, for the simple reason that when it comes to the blockchain, each is just a ledger entry: a debit and a credit. ”

Fight crime

The Bitcoin ledger has already been used to quickly solve large-scale crime and identify criminal activity – an explanation for why illegal activity currently accounts for less than 1% of transaction activity, in stark contrast to the 2% to 5% of global GDP from money laundering alone caught, says the report.

Government reactions

Some governments reacted as Bitcoin hit higher and higher highs in 2017/18. Several governments currently have total bans on Bitcoin, including Algeria, Ecuador, Egypt, Nepal, and Pakistan. Others, including Saudi Arabia and Taiwan, have put in place a partial ban that usually prevents financial institutions from trading the cryptocurrency or facilitating Bitcoin transactions.

The next evolution of the global e-commerce trend

Fifteen years ago, e-commerce was a happy promise, but few retailers paid much attention to it. It now dominates certain market segments such as book retailing and software.

The same theme plays out in the cryptosphere. “We will be living in a hybrid world of central and decentralized systems for the next five to ten years,” says Bin Ren from Elwood Asset Management.

Read: Six bitcoins will buy you a R1.4m house

Nathaniel Luz, head of the crypto company Dash Nigeria, says we are entering an era where there are potentially hundreds of thousands of cryptocurrencies alongside government-issued currencies like the naira and rand. Because of this, central banks are pushing plans to introduce digital versions of their currencies, known as central bank digital currencies, or CBDCs.

“In developing countries, digital currencies are a stepping stone for financial integration,” says Michael Sonnenshein, CEO of Grayscale Investments, the world’s largest asset manager for digital currencies.

“Think of the advent of cell phones as a technology that has overtaken traditional landline connections. It is comparable to digital currencies in that half of the world’s adult population does not have access to financial services. Digital currencies like Bitcoin could help to skip traditional banking systems. ”

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