How Do You Stop 2 Billion People from Adopting Cryptocurrency?
You don’t, you can’t, you shouldn’t.
Governments should instead embrace and harness the power on offer of new digitally tokenized schemes because it solves three tremendously difficult decades-old global problems in one fell swoop. The recent move by the Kenyan Government to effectively close down the virtual currency Bitpesa is shortsighted and misses a significant opportunity for the country to get out in front in the blockchain space.
When I refer to governments embracing blockchain-enabled technology, I am directing this squarely at developing country governments, because of the immense opportunities the technology presents them to developmentally leapgfrog. Developed country governments and institutions are already moving and this is the time for developing countries to watch closely and intentionally study the innovation taking place. The British Government, advanced states in the European Union, the D5, almost all international banks, most stock exchanges, global payment system providers like Visa and Mastercard are all moving into the blockchain space to reduce transaction friction, improve settlement times, and reduce fraud; how much more evidence do developing countries need? Developing countries need to act now. If they do, we solve a number of significant global development problems and effect a leapfrog like mobile telephony and the Internet was.
We solve the problem of citizen identification. No, this doesn’t involve everyone getting a bar-code tattoo. We just encode biometric markers like a retinal scan or a fingerprint, methods we use today all over the world, into the digital ID assigned to every person wanting to make an exchange of fiat-to-crypto or crypto-to-fiat. At the interchange institutions: the places where fiat currency is exchange for cryptocurrency (FXC) and cryptocurrency is exchanged for fiat currency (CXF), we just apply Know Your Customer and Anti-money Laundering (KYC/AML) regulations. These regulations already exist and have been successfully applied by the US at a global scale — so this can be done.
We solve the problem of financial exclusion. The cost of banking assumes that you meet certain economic criteria and about 2 billion people simply don’t. A carpet seller in Afghanistan has to go about life very differently because she cannot transact on our mainstream financial system. She, who is already doing it tough, needs an ultra-low-cost way of joining the global financial system. Banks can’t offer that service at a price she can afford to pay today. Reducing the cost of banking to enable financial inclusion is not a new principle: for decades governments around the world have invested millions in pilots and schemes to tokenize and digitise payments for promote financial inclusion — they write about their success in the “digital payments” body of literature. Examples are numerous: M-Pesa (Africa), WFP’s E-vouchers for food aid distribution (Afghanistan), P2G & B2G payments prevents “leakage” by 40% (Tanzania), “Tarjeta RED” was an emergency payment system based on debit cards (Chile), Digital Direct Deposits (Malawi) — the digital token scheme is a decision already made, to a large degree, but just not on the blockchain and so not at global scale.
We solve the problem of tracking money flows. Digital tokens are traceable: no matter how frequently transactions occur, no matter how far transactions counterparties are, and no matter how small a transaction amount is; the money is traceable (and to a particular person, if identity is established before a digital ID is issued). The conceptual association that cryptocurrencies are for those who want to transact anonymously originated in Bitcoin. Bitcoin is permissionless. For this to work we need a permissioned version of Bitcoin, which is what I propose FXC/CXF interchange points will provide. Transact in Bitcoin, but with one’s identity established and protected at regulated control points. In exactly the same way that we establish our identity with banks today, we would establish our identity once at an interchange point. From then on, we know how the money travels.
As someone who travels the world for a living, I have been humbled (and fortunate) to see firsthand the plight of those who have no means of transacting. It made me question everything about my “world view”. Using cryptocurrency alternatives, or in the least blockchain-based token schemes, provides three compelling benefits for all of us: (a) a way of identifying who is moving money with whom, but at a cost orders of magnitudes lower than how we identify people today in traditional banking; (b) a banking platform that an additional 2 billion people can trade on (and because financial inclusion is about baking a larger economic pie , economics is not a zero-sum game, this is better for everyone); and (c) a bright spotlight into the dark recesses of our global economic system that to date has contributed to the funding of global instability and insecurity.
Within reach is a new technological paradigm that once adopted will change how our world operates forever and for the better. Now we need to tell our world’s leaders about it.