Welcome to my first column – ‘Blockchanging the The World Bit by Bit’!
I have long been a believer in blockchain as a social impact enabler, and I have also predicted that we will see rapid adoption and innovation in emerging markets, which often remain under-reported in the West.
A meta-theme of this column will be that emerging markets will be the new global growth engine with increasing mobile penetration; a young population and receptivity to technological innovation. Mobile technology at almost 70% of the world’s population is creating an unprecedented opportunity for the bottom billion to connect to the economy, with 1.08 billion mobile phone connections in Africa and 4.3 billion in Asia Pacific, and internet connectivity in Africa and Asia growing at between nine and 10% per year.
Almost 90% of people under 30 live in emerging economies, and these millennials respond well to digital-first service delivery and want financial inclusion. A second meta-theme will be that many of the applications we see in emerging markets will be impact focussed – because of the utility of the technology and the fact that their needs are great.
Emerging markets are among the fastest adopters of crypto, with We Are Social 2020 reporting the top 10 countries with the proportion of population between 16-64 who own crypto being Philippines, Brazil, South Africa, Thailand, Nigeria, Indonesia, Colombia, Turkey, Malaysia and Portugal. This is echoed by Chainalysis , who report the top 10 countries in crypto as Vietnam, India, Pakistan,Ukraine,Kenya, Nigeria,Venezuela, USA, Togo, and Argentina.
They suggest the adoption in emerging markets is for preservation of savings in the face of currency devaluation, sending and receiving remittances, and carrying out business transactions, in contrast with growth in North America, Western Europe, and Eastern Asia over the last year powered largely by institutional investment. The report shows that Central and Southern Asia, Latin America, and Africa send more web traffic to P2P platforms. This contrasts with the larger economies of Western Europe and Eastern Asia, creating a situation that P2P platforms have a greater share of total transaction volume made up of smaller, retail-sized payments under $10,000 worth of cryptocurrency.
So, what is happening in emerging economies? We have seen the acceleration of crypto as an intermediary currency in cross border transfers. Bloom solutions has delivered more than $250,000,000 in blockchain transactions at minimal cost across Southeast Asia since 2015, and is licensed by the Central Bank of the Philippines.
Luis Buenaventura from Bloom Solutions in the Philippines, reported increased use of crypto as a store of value and increasing use by micro entrepreneurs. He explained: “Micro entrepreneurs are buying Bitcoin from Bloom. They are using that Bitcoin to buy Netflix cards or Spotify cards or iTunes cards. And then they’re reselling that to their neighbours, to their village that is in the rural area of the country. And they’re making money that way.”
BitPesa, in Africa also uses Bitcoin as an intermediary currency and avoids storing cash reserves in the destination countries for instant settlement. Have you heard of Chipper Cash, a no-fee peer-to-peer cross-border payment service across Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa and Kenya?
In Venezuela, with millions of people struggling to feed themselves, as well as a lack of alternative reserve currencies and an economic crisis of near-catastrophic proportions has led to people adopting crypto currencies as a store of value. In Lebanon, where Lebanese banks are increasing restrictions on foreign currency movements, more people are turning to digital currencies like Bitcoin as a way to shift their money in and out of the country.
Emerging crypto titans
New platforms are being built and new crypto titans are emerging. Typically, the ‘top 100 in crypto’ is limited to the west, and it should be more inclusive as we see the likes of Sandeep Nailwal , co-founder of Polygon – a fast growing platform with low fees and fast transactions – from India? The Polygon price today is $2.09 USD with a 24-hour trading volume of $1,559,730,040 USD.
Gaby Dizon, from the Philippines, has come to prominence with his company Yield Guild Games , a holding company for play-to-earn gaming. Using a similar model to Axie Infinity, YGG reported that more than 4,600 people from the Philippines, Indonesia, India, Venezuela, Peru, and Brazil, earned above USD$5 million in four months during 2020.
The YGG model is attractive to the poor as players are lent NFTs with zero downside risk and no upfront capital. In return, they return 30% of their winnings but retain the majority. Think about this across the developing world! Play-to-earn games open a whole new and accessible economy in developing countries, with just a mobile phone. An estimated 50% of daily active users of Axie Infinity are in the Philippines, and it is growing in popularity in other emerging markets like Indonesia, Brazil, Venezuela, India, and Vietnam. BitMama, Ruth Iselema is one of many successful African blockchain entrepreneurs.
Small states in emerging markets have also grasped opportunities – Bermuda, Barbados, Mauritius, and Vanuatu to name a few. Of the 200 countries in the world, 100 have populations of six million or less, and small states have been quick to jump into blockchain faster, leaping ahead in building the new architecture.
In smaller jurisdictions, their practicality, dynamism, and willingness to adopt new technologies, can make them more accessible, responsive, competitive, and less inhibited by entrenched, more traditional ways of doing business than larger countries around the world. Regulatory agility is a significant opportunity determining which nations are able to successfully adopt blockchain technology. When blockchain technology emerged, many smaller jurisdictions were perfectly poised to effectively engage with it. Blockchain can provide an opportunity to small states to spread the benefits of scale in a world where geography has less meaning, and small size is an asset enabling nimbleness.
Veteran crypto journalist Aaron Stanley has moved to Brazil, and makes the point that the country has 214 million tech-savvy people. More than 108 million are on WhatsApp and 40 million are Nubank clients. He predicts ‘a hotting up’ of the competition from markets like Brazil. It is a market that still has a lot of room to grow.
Mercado Bitcoin has established itself as Brazil’s premier homegrown crypto exchange and became the country’s first crypto unicorn in 2021 – we may see a showdown, with some of the older exchanges in 2022.
Blockchain and crypto adoption and innovation are already being used across the developing world. With intentionality and investment, they can be scaled, and enable more funds to reach those in greatest need. Worth contemplation. This is a clear area in which companies and investors should be focusing their funding.
Blockchain in emerging economies is one of the world’s most exciting markets for real innovation, and with real human benefit post-pandemic. With huge, young populations, growing mobile and internet penetration and massive problems to solve, we expect to see more innovations in blockchain and crypto from emerging markets – this is the space to watch! Join me in ‘Blockchanging the World’ as we explore these and many more stories of emerging markets and impact.