One of the biggest experiments in bringing cryptocurrencies to the mainstream is taking place in the small Central American nation of El Salvador. Earlier this summer, the country’s legislative assembly authorized granting Bitcoin status as legal tender inside El Salvador beginning September 7th. One month after Bitcoin joined the U.S. dollar as the second official currency in the country, what can be said of the project so far?
This morning, Reuters took up the question of Bitcoin adoption in the country and discovered that the initiative has boosted use of the cryptocurrency, but that increase in use has come with more than a few “headaches” for many Salvadorans who have attempted to withdraw cash from Bitcoin wallets or make other transactions with the digital asset.
On the adoption front, Forbes reported late this week that the Bitcoin project has resulted in more Salvadorans having digital, Bitcoin wallets than traditional bank accounts. According to the article, approximately three million Salvadorans have downloaded Chivo, the new, government-sponsored digital wallet to facilitate Bitcoin transactions. This adds up to 46% of the country’s 6.8 million population. “By contrast,” Forbes noted, “as of 2017, only 29% of Salvadorans had bank accounts.” The Forbes account also observed that Chivo is not the only option available to those seeking to transact in the cryptocurrency; the availability of other digital wallets suggests that the estimates on early Bitcoin adoption by El Salvador’s citizens could be significantly higher.
El Salvador president and long-time Bitcoin backer Nayib Bukele boasted recently of negotiations with the country’s largest gas stations to offer reduced prices for those paying for gasoline using the Chivo app. But widespread adoption by the country’s retailers will still be one of the initiative’s biggest hurdles. Part of this issue is likely timing- a Reuters story reported that, according to the Salvadoran Foundation for Economic and Social Development, 12% of consumers have used Bitcoin in the month since the Bitcoin Law was implemented, and that 93% of the 233 companies it surveyed were reporting no payments in Bitcoin over the same time period. But another part of the issue may be easily explained by Chivo itself, which provides instant conversion from Bitcoin to dollars – meaning Salvadorans who own Bitcoin can still readily pay for transactions in dollars if they choose to.
Nevertheless, early indications are that the project may accomplish its most important role of promoting financial inclusion – especially among the country’s poorer, rural-based citizenry. While some in the business community remain skeptical – and more aggressive opponents of the measure have resorted to vandalizing and defacing Chivo ATMs – others point to the possible use of Chivo as a way for expat Salvadorans living in places like the U.S. to send money to family still in El Salvador as a use case that could help drive Bitcoin adoption in the country. Potential cost savings of using Chivo instead of traditional money transfer services – as well as the Salvadoran government’s willingness to incentivize Chivo use with Bitcoin bonuses of up to $30 – could help Bukele’s Bitcoin brainchild sustain the momentum it already has achieved in its first 30 days.
Here is our look at fintech innovation around the world.
Central and Southern Asia
- India’s ICICI Bank launched a new contactless payment option on its iMobile Pay banking app.
- Pakistan-based fintech and logistics startup PostEx raised $1.5 million in seed funding.
- TechCrunch looked at the growing VC interest – including from Tiger Global – in Indian fintech startup Slice.
Latin America and the Caribbean
- ICYMI: Latin American Buy Now Pay Later company Addi secured a $75 million extension to its Series B, taking the round’s total to $140 million.
- Mexican digital payment and commerce platform Clip earned a spot on CB Insights 250 roster of top fintech startups.
- Uruguay-based payments platform dLocal launched its Direct Issuing service that enables merchants to issue their own branded prepaid cards.
Asia-Pacific
- China-based Union Smart Card chose fingerprint authentication technology from IDEX Biometrics.
- Singaporean equity management SaaS solution provider Qapita raised $15 million in seed funding.
- Wirex launched its crypto platform in Vietnam this week.
Sub-Saharan Africa
- Mastercard teamed up with Digital Paygo, a fintech based in Zambia, to launch a new merchant mobile payments solution.
- Standard Bank introduced its EasyScan mobile payments offering for South Africa’s Pick n Pay customers.
- Nigerian blockchain infrastructure startup Bitmama secured $350,000 in pre-seed funding.
Central and Eastern Europe
- Lativan open banking innovator Nordigen partnered with Authologic to help the company’s clients verify their identities online.
- Germany-based Scalable Capital announced plans to expand to France, Spain, and Italy.
- Web Shield, an onboarding and monitoring solution provider based in Germany, launched its High-Risk Verification tool which meets Mastercard Revised Standards.
Middle East and Northern Africa
- BioCatch launched its Age Analysis account opening protection capability.
- Areeba, a Lebanon-based, issuing and acquiring service provider to financial services companies in the Middle East, teamed up with Netcetera to implement the latest 3-D Secure protocol 2.2.
- Egyptian fintech Z-Walet announced plans to introduce a new prepaid card and app for youth aged six to 18.
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