How Bitcoin Got Muzzled as the World's Unbanked Continue to Struggle

How Bitcoin Got Muzzled as the World's Unbanked Continue to Struggle

In the year 2000, I was just finishing my studies in Australia. The Internet was going to revolutionise everything. I thought of it as an equaliser of sorts. It provided anybody — even in developing countries  — with the opportunity to set up a website, do business online and sell their products and services to people all over the world. I was getting excited about the adoption and use of the Internet for e-Commerce. Coming from an immigrant family, I found this appealing because the disadvantage of not having roots in a country would be less relevant if you wanted to do business in the digital age.

After my studies, I found work as a Graduate Accountant. However, after seven months working in the industry for which I have spent years studying, I wanted to make websites for businesses, so I taught myself to develop websites. I quit my job, and I started my first web design business. I went knocking on doors, literally, alongside commercial roads telling business owners not to get left behind.

I expected the transformation to be swift. In some ways, it was. For many of you reading this, you have probably started buying more online, especially now when Covid-19 drove many cities and countries in lockdown. Unfortunately, however, the transformation to eCommerce did not happen in the poorer countries.

At its core, all you need to get a website up and running is a hosting service and a domain name. You have open-source software you can use to build websites. Technically, starting an online business is doable, and it can be done a thousand times cheaper compared to a brick and mortar business. Any developer in India or the Philippines can create websites to do business. Even if you are not a developer, you can invest your time to learn how to build a website using any of the popular open-source content management systems. If the technology is there, then what is stopping or retarding the progress of eCommerce in many countries?

The answer came to me in 2015 when I wanted to pay for the costs of an Internet connection for my relatives in the Philippines after I had just visited them. They lived in the provinces, and if they had at least one household where they could go to to look for work, study or research, it would help them out tremendously.

The most obvious solution was for me to transfer money from my bank account to one of my relatives in the Philippines. Which relative? As it turned out, none of my roughly hundred adult relatives had a bank account!

It was too expensive to maintain one, my relatives told me. One trouble they had was keeping the minimum balance required by the banks. This may have been standard for people in more developed countries, but for people whose average wages are ten to a hundred times less, they could not afford it, and the banks ended up closing their bank accounts.

The only person whom my relatives knew had a bank account, worked at a bank. But she did not live in the same province. It would take a five-hour bus ride to reach her. Then I found out that for transferring the $40 Australian Dollars to her to cover an average monthly internet connection, my bank would charge me $30!

This experience made me realise there is a problem with our current financial, monetary and payment system. How can ordinary citizens in the Philippines, or any other developing country, take advantage of the Internet, develop a website and sell their services when they do not even have access to a bank account?

2.5 billion adults are unbanked or underbanked. Anywhere from 50% to 80% of adults in Asia, Africa and the Middle East have no access to bank accounts.

According to a study done by McKinsey research, about 2.5 billion adults are unbanked or underbanked. Anywhere from 50% to 80% of adults in Asia, Africa and the Middle East have no access to bank accounts [1].

Now, years later, we are amid a pandemic. SARS-CoV-2 has already killed more than a third of a million people around the world. As the virus silently makes its way into communities in Africa, South America, the Middle East and Asia, the likely outcome for many is both tragic and harrowing. Their health systems are severely under-equipped to save many of them. In Asia, there is only an average of 3.6 intensive care beds for every 100,000 people on average [2]. In Africa, ten countries on the continent do not have ventilators [3].

In the next few months, the need to send money to friends and relatives will be even more urgent. Think of the plight of the many migrant workers who need to send money to their parents to pay for an operation, or to buy food for their families. Being able to send and receive money quickly and cheaply to even the most impoverished communities in the world will make the difference whether someone eats or starves, lives or dies.

With no vaccine against the virus, the only defensive strategy we have to survive is to minimise the chances of getting infected by using social distancing and lockdowns. In lockdowns, people in richer countries can easily stay at home, order their groceries online and have them delivered to their doors. They have freezers and refrigerators so they can afford to stock up on groceries and only go out to shop once a week or a fortnight. But how can those without bank accounts create a website from which to sell products to people in their community if they have no simple, safe, effective and affordable way of being paid?

As Covid-19 continues to break out around the world, people are told to isolate themselves in the small home they share with their family and relatives. Suddenly, they can no longer go out and eke out a living with limited access to food reserves, freshwater, soap, disinfectants and other essentials. There is also little to no financial support from their governments to supplement their income.

Left unserved by financial and monetary institutions, they are denied opportunities that eCommerce and ePayments enable. They are left buying and selling in markets or at the side of roads.

I watched a news report about a man in South Africa. In his desperation to keep his family alive, he goes outside to sell his last stock of spinach before they wilt, so he can have the cash to buy next day's necessities. He sits nervously, continually looking around. He risks getting infected by any of the people who come along and buy from him. He also risks being arrested by the police out to enforce social distancing rules.

While I am watching this news report, I hear a knock on the door. It is the delivery man letting me know that the bag of groceries I ordered and paid for online is now waiting outside. The contrast could not have been starker.

Covid-19 presents the consequences of years of ignoring the warnings of our scientists that we are under-prepared for a pandemic. As a society, we have continued to starve our scientific, health and research institutions of adequate investments. Politicians and the public are now becoming aware of the importance of sufficient investment in our health and medical industries. However, for me, the one thing that is not recognised is the impact of our current financial, monetary, and payment systems to allow all people around the world to survive this pandemic.

Covid-19 presents the consequences of years of ignoring the warnings of our scientists that we are under-prepared for a pandemic. As a society, we have continued to starve our scientific, health and research institutions of adequate investments. Politicians and the public are now becoming aware of the importance of sufficient investment in our health and medical industries. However, for me, the one thing that is not recognised is the impact of our current financial, monetary, and payment systems to allow all people around the world to survive this pandemic. Is there no other way?

To answer this, we ask why it is this way, in the first place. The explanation so far is that large banks do not want to service many of these areas. There are risks and costs involved for banks to set-up the substantial financial, political and economic institutions they need to operate. To cover these costs, they would need to ask for rates and fees too expensive for the local population to afford.

The cost of doing business in developing countries suffering from corruption and lacking sufficient law enforcement is high. It is therefore up to the governments of these countries to ensure law and order to minimise the cost of doing business to attract global financial institutions to serve their citizens.

What would happen then when an alternative comes along, making it easy to send 'money' to anyone, anywhere in the world quickly and instantaneously?

Such an alternative did come along. In 2008, an anonymous author, who went by the name Satoshi Nakamoto, wrote a whitepaper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" [4]. In this, he describes how it is possible to have digital cash – called Bitcoin – to be issued, maintained and operated without central banks, banks or governments. Transaction records are stored in what is called a Blockchain. This blockchain is replicated on computers the world over to ensure nobody can change these records without consensus. It will all be regulated by open source software so that everyone is free to look at the code, investigate it and analyse it to understand how it works.

Satoshi's ideas were not just theoretical because not only did he write about how the concept of secure digital cash is possible, he went a step further. He teamed up with developers to develop the software to make it all possible. In January 2009, the software – the Bitcoin protocol – was released. The Bitcoin blockchain has never been successfully attacked since. It is a true testament to the security model of Satoshi's invention. More importantly, it worked. It was possible to send money as easily and quickly as sending an email.

Bitcoin seemed to solve a lot of problems. Many expected it to be supported, used and adopted. Instead, it was feared. Bitcoin posed a disruption too threatening to many businesses, institutions and industries that exist primarily to profit from operating an older, more cumbersome monetary system based on fiat currencies.

Bitcoin posed a disruption too threatening to many businesses, institutions and industries that exist primarily to profit from operating an older, more cumbersome monetary system based on fiat currencies.

Many interest groups do not want Bitcoin to succeed because of its potential to disrupt their current positions from which they benefit, and therefore, they are incentivised to keep the monetary system as it is. They make all sorts of arguments like, 'Bitcoin facilitates money laundering' even though money laundering is happening right under the noses of supposedly regulated entities. The CEO of financial banking powerhouse JP Morgan Chase, Jamie Dimon, called Bitcoin a fraud and claimed it could only be used for money laundering. Shortly afterwards, JP Morgan was busted and fined for money laundering and was fined $4 billion for mortgage fraud! [6]

They also argue that Bitcoin can be used to fund terrorism and to commit crimes, ignoring the fact that the US Dollar is the most popular currency used by terrorists and criminals the world over. They argue that Bitcoin uses a lot of electricity and yet fail to compare that with the electricity used by all the banks, central banks and financial institutions just to operate a monetary system.

Governments are also confused about Bitcoin. Some are hostile. In 2019, it was revealed that the US Government tried to shut down Bitcoin in 2012. Katie Haun, the Federal Prosecutor they asked to do the job, confessed that it was like being asked to go and 'prosecute cash' [5]. The Chinese government was afraid of the impact of many of its wealthy citizens converting their assets to Bitcoin: an asset over which they have limited control. Hence, it banned everything it could to stop its progress.

Bitcoin was ultimately crippled when its development was eventually taken over by a group of 'developers' who refused to raise the 1MB block size limit: the block-size limit that Satoshi Nakamoto insisted be removed when the network became congested. This suffocated Bitcoin when its network became flooded with transactions like it did in 2017 and the average transaction fees went as high as $37 [7], and people had to wait for days and weeks on end to have their transaction processed.

In their struggle to tame, control or impair Bitcoin, different groups have contributed to the outcome that Bitcoin's use-case is limited and mostly unusable as a global currency. Development in Bitcoin slowed down, and many shops stopped offering it as a payment method. Ten years after its inception, Bitcoin failed to be massively adopted and used.

In the case of the Internet and Bitcoin, it seems to me that the technology we need to solve problems exists. It is laws and regulations that slow down its acceptance and implementation. This is acceptable if the delay is from an honest effort to protect the disadvantaged, the weak and those without representation. With Bitcoin, however, a case can be made to argue that sometimes laws and regulations exist only to protect the profits of the wealthy or to ensure that power and control remain with those who already have it. If this is in fact what is going on, then we have to recognise that it is unconscionable, unjust and unfair to deliberately make life harder for millions of people for the sake of profits or power for the very few.

In the case of the Internet and Bitcoin, it seems to me that the technology we need to solve problems exists. It is laws and regulations that slow down its acceptance and implementation. This is acceptable if the delay is from an honest effort to protect the disadvantaged, the weak and those without representation. With Bitcoin, however, a case can be made to argue that sometimes laws and regulations exist only to protect the profits of the wealthy or to ensure that power and control remain with those who already have it. If this is in fact what is going on, then we have to recognise that it is unconscionable, unjust and unfair to deliberately make life harder for millions of people for the sake of profits or power for the very few.

Still, much like we began this article, we have to remain hopeful and focus on what we want to see in the world. I believe that if we empower individuals and citizens of developing nations, they can pull themselves out of poverty. When this happens, it does not only benefit them. It will benefit us all. Tremendously.

ABOUT THE AUTHOR

Marquez Comelab is currently exploring and learning how individuals and small businesses can use Bitcoin Satoshi Vision (BSV), especially as the need to quickly and cheaply send and receive money is becoming more urgent during the current pandemic caused by the SARS-Cov-2 virus. marquezcomelab.com.

 

FOOTNOTES

 [1] "Counting the world's unbanked" by Alberto Chaia, Tony Goland, and Robert Schiff, McKinsey Research, McKinsey.Com, 1 March' 2010, https://www.mckinsey.com/industries/financial-services/our-insights/counting-the-worlds-unbanked, last accessed 16 April 2020

[2] "Critical Care Bed Capacity in Asian Countries and Regions", ResearchGate.Net,
https://www.researchgate.net/publication/338520008_Critical_Care_Bed_Capacity_in_Asian_Countries_and_Regions, last accessed 19 April 2020.

Authors: Phua, Jason & Faruq, Mohammad & Kulkarni, Atul & Redjeki, Ike & Detleuxay, Khamsay & Naranpurev, Mendsaikhan & Sann, Kyi & Shrestha, Babu & Hashmi, Madiha & Palo, Jose Emmanuel & Haniffa, Rashan & Wang, Chunting & Hashemian, Seyed & Konkayev, Aidos & Mat Nor, Mohd Basri & Patjanasoontorn, Boonsong & Nafees, Khalid & Ling, Lowell & Nishimura, Masaji & Fang, Wen-Feng. (2020). Critical Care Bed Capacity in Asian Countries and Regions. Critical Care Medicine. 48. 1. 10.1097/CCM.0000000000004222.

[3] "10 African Countries Have No Ventilators. That's Only Part of the Problem.", The New York Times, 18 April 2020, (last accessed, 20 April 2020).

[4] Satoshi Nakamoto seemingly disappeared. Nobody knew who he was because nobody met him in person. People communicated to him using internet forums and emails. In 2010, he just stopped communicating.

[5] Over time, as Haun and her department began to understand the technology behind Bitcoin, they started using Bitcoin to solve cases and eventually, her view on Bitcoin evolved. She later changed careers and has become one of the most recognisable investors cryptocurrencies. (Article: "Meet the former prosecutor asked to investigate bitcoin who became the face of crypto VC investing" by Kate Rooney, CNBC.Com, 6 October 2019, https://www.cnbc.com/2019/10/06/meet-the-former-prosecutor-who-became-the-face-of-crypto-vc-investing.html, last accessed 31 May 2020.)

 [6] "While Jamie Dimon Calls Bitcoin a "Fraud", JPMorgan is Busted For Money Laundering" by Joseph Young, CCN.Com, 17 November '17, https://www.ccn.com/jpmorgan-busted-money-laundering-ceo-condemns-bitcoin/, last accessed 31 May 2020.

[7] "The cost of bitcoin payments is skyrocketing because the network is totally overloaded" by Becky Peterson, Businessinsider.nl, 29 December. '17, https://www.businessinsider.nl/bitcoin-payment-mining-fees-hit-new-high-2017-12?international=true&r=US, last accessed 2 June 2020.

Tags:   Bitcoin Bitcoin Satoshi Vision, Bitcoin SV (BSV) cryptocurrencies eCommerce economics unbanked Covid-19 Coronavirus
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