Crypto Use Is Taking Root in Emerging Markets


A cellphone accessories shop that accepts Bitcoin in San Salvador, El Salvador.

Camilo Freedman/Bloomberg

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A Chinese family pays U.S. private school tuition in Bitcoin. A Kenyan working in Germany sends a remittance home, avoiding a fat commission. Cambodian villagers buy market supplies via QR code instead of stacks of cash. While U.S. investors scramble to speculate on the first Bitcoin exchange-traded fund, real-world uses for cryptocurrency are quietly taking root across developing countries, where governments block fiat transactions or middlemen impose exorbitant fees.

“In Africa you might have to fly a suitcase full of cash to trade with the country next door,” says Ray Youssef, CEO of peer-to-peer crypto exchange Paxful. “Bitcoin frees your money from that financial prison.” Crypto use is expanding in two ways in emerging and frontier markets: from the bottom up through increasingly user-friendly exchanges like Paxful or Binance, and from the top down as governments roll out official digital currencies. An unlikely pioneer in this category is Cambodia, whose Bakong system has attracted six million users since launching a year ago, says Claire Wilson, a partner at Asia-based consultant Holland & Marie. The bottom-up movement is more what Bitcoin’s founders probably had in mind. Nigerians, for instance, have flocked to crypto transfers for the $25 billion or so they receive annually from relatives abroad, Youssef says. This gets around an official exchange rate that can be 30% lower than the real black market rate. South Africans use crypto to exceed their government’s limit of one million rand ($68,300) in capital export a year. China, which combines global commercial reach with strict capital controls, could dwarf other jurisdictions in its appetite for alternative cryptocommerce. “We’re finding a lot of use cases around importing goods where China is the counterparty,” says Kimberly Grauer, director of research at Chainalysis, which follows global crypto trends. Governments from Beijing to Abuja have fought such erosion of their prerogatives. Now they have “begun to appreciate and explore the benefits of crypto” for their own use, Wilson says. A key motive is reaching the 1.7 billion adults worldwide who have no bank account, by World Bank numbers. About 70% of Cambodians are unbanked, but most can now connect to a digital network via cellphone. Thailand should unveil a digital currency next year, with neighbors like Indonesia and Malaysia not far behind. Not to mention China’s digital yuan, which is supposed to go live nationally in 2022. “The technology for digital currencies probably already exists,” Wilson says. “I expect Asia to respond quickly within the next five years.” An accelerated mashup of bottom-up and top-down crypto expansion is under way in another unexpected geography: El Salvador, which made Bitcoin legal tender last month. Paxful’s Youssef smells opportunity in a country where remittances provide a fifth of gross domestic product. “People were a little scared at first, but now their hearts and minds are open,” he says. Other observers see more misery in store for Salvadorans, as Bitcoin’s value pitches and rolls with the mood of faraway First World investors. “Imposing the use of Bitcoin on people in a low-income country is not a good policy measure,” says Paola Subacchi, who teaches international economics at Queen Mary University of London. However the El Salvador experiment works out, digital money is finding applications beyond gambling, with emerging markets in the lead.



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