CAN THE CARIBBEAN BE­COME THE NEXT CRYPTOVALLEY?

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY ED KENNEDY, STAR BUSINESSWEEK COR­RE­SPON­DENT

In case there was any doubt, Septem­ber proved it. Less than seven years ago - in 2011 - it was pos­si­ble to buy a Bit­coin for un­der $1. At the start of last month, the price for a Bit­coin soared to a record price of $5,000. It has since gone even higher. Cryp­tocur­rency may sound com­plex; it may be some­thing in which many in­vestors don’t yet in­vest. Yet, what­ever the case, it’s un­doubted: all busi­nesses in the Caribbean need to now con­sider cryp­tocur­rency as part of their fu­ture. While cryp­tocur­rency is global, just as cur­ren­cies dif­fer from one na­tion to an­other, each re­gion has its own unique ap­proaches to trad­ing. Cen­tral to the story of cryp­tocur­rency in the Caribbean for busi­ness, is per­sonal use and own­er­ship. A busi­ness needs con­sumers to have cur­rency, and con­sumers need to have ac­cess to cryp­tocur­rency mar­kets ac­cord­ingly.

AD­VAN­TAGES

For those yet to feel they’ve a good un­der­stand­ing of cryp­tocur­rency, an over­view is use­ful. Cryp­tocur­rency is dig­i­tally cre­ated cur­rency that is traded on­line, and can in­creas­ingly be used for ‘real world’ spend­ing via eCom­merce stores, and reg­u­lar debit cards. Dis­tinct from a tra­di­tional in­vest­ment as­set like a stock, a cryp­tocur­rency is a whole as­set in and of it­self, and af­fords its owner a greater de­gree of free­dom and in­de­pen­dence than a tra­di­tional in­vest­ment.

Be­cause the Caribbean and wider world is fast shift­ing to a truly dig­i­tal econ­omy, cryp­tocur­ren­cies are an at­trac­tive prospect for busi­nesses, es­pe­cially those that seek to be ag­ile and lean, as cryp­tocur­ren­cies like Bit­coin of­fer a way for busi­nesses to ex­change goods with clients in a sim­ple and straight­for­ward way.

Not only does this have the po­ten­tial to do away with ex­cess costs such as han­dling fees and charges but, due to the blockchain peer-to-peer sys­tem, it also means that trans­ac­tions are now pro­cessed in mo­ments rather than days. The ad­van­tage of this flex­i­bil­ity and speed is just one el­e­ment of the many in­no­va­tions cryp­tocur­rency can de­liver.

So, how does the Caribbean com­pare to else­where when it comes to cryp­tocur­rency adop­tion?

CHAL­LENGES

The Caribbean is a unique re­gion glob­ally due to its rel­a­tively small pop­u­la­tion con­trasted with the di­ver­sity of its gover­nance and eco­nomic sys­tems. While just three states (California, Ore­gon and Wash­ing­ton) on the U.S West Coast hold a to­tal of 50 mil­lion peo­ple, the Caribbean sees its 43 mil­lion res­i­dents spread across 28 dif­fer­ent ter­ri­to­ries. The ca­pac­ity for the re­gion to take ad­van­tage of the rise of the cryp­tocur­rency era is in­formed by its growth on a na­tional level.

This is where busi­nesses can be es­pe­cially im­pacted by lo­cal politics. While cryp­tocur­ren­cies may rep­re­sent cut­ting edge dig­i­tal tech­nol­ogy, lim­ited in­ter­net ac­cess will al­ways in­form the abil­ity of lo­cal com­merce to take ad­van­tage of it. With 2016 es­ti­mates in­di­cat­ing 18 mil­lion (43.7 %) of the re­gion has in­ter­net ac­cess, grow­ing con­nec­tiv­ity on a foun­da­tional level will serve as a vi­tal step to tak­ing ad­van­tage of the new tech­nol­ogy in the re­gion.

The tech­no­log­i­cal ca­pa­bil­ity for cryp­tocur­rency can ex­ist and be ready for use, but if there is ex­ten­sive re­stric­tion placed upon it - or an out­right ban - by a Caribbean govern­ment, the ca­pac­ity for it to be used lo­cally is lim­ited. This helps ac­count for the vary­ing ap­proaches be­ing seen to cryp­tocur­rency in the re­gion, and how lo­cal gover­nance is im­pact­ing its wider adop­tion.

PO­LIT­I­CAL CONSIDERATIONS

Cryp­tocur­rency is a dif­fi­cult fi­nan­cial as­set to reg­u­late. This is owed to many fac­tors. Its new­ness is one; the di­ver­sity of cur­ren­cies in the field - from Bit­coin to Ethereum, Lite­coin to Dash, and many more - is an­other. In turn, even the more lim­ited un­der­stand­ing of the dig­i­tal cur­rency among govern­ment and pol­icy mak­ers has an im­pact; com­par­a­tively few ex­perts in cryp­tocur­rency ex­ist given its young age, es­pe­cially when com­pared to reg­u­la­tion of cen­turies-old in­vest­ments in shares and prop­erty.

What’s more, the dif­fer­ent mod­els of gover­nance through­out the Caribbean is also prov­ing im­pact­ful. Though na­tions like An­tigua and Bar­buda have sought to shift to­wards reg­u­la­tion of cryp­tocur­rency in var­i­ous forms, there is yet to be shared con­sen­sus re­gion­ally about the best meth­ods for reg­u­la­tion.

This ten­sion has been mir­rored in other parts of the world, most promi­nently be­tween Ja­pan and China. While the com­plex­ity of cryp­tocur­rency means spe­cific govern­ment pol­icy can al­ter the land­scape at any­time, broadly speak­ing, Ja­pan has been pro­gres­sive and wel­com­ing of cryp­tocur­rency’s rise. Con­versely, China has been more ret­i­cent, hav­ing recently banned Ini­tial Coin Of­fer­ings (ICOs) and has shown a greater weari­ness to cryp­tocur­rency over­all.

How­ever, greater free­dom comes with greater chal­lenges. As cryp­tocur­ren­cies like Bit­coin are cre­ated via a com­plex tech­ni­cal process known as min­ing, and then traded over a net­work known as blockchain, there is no cen­tral author­ity like a fed­eral re­serve or trea­sury. In turn, traders have a greater ca­pac­ity to re­main anony­mous com­pared to tra­di­tional as­sets.

Not only has this made reg­u­la­tion of cryp­tocur­rency a dif­fi­cult con­sid­er­a­tion for gov­ern­ments around the world, it has also given rise to con­cerns sur­round­ing scams and other crime. Much of these con­cerns can be owed to the rel­a­tive new­ness of the tech­nol­ogy (the most prom­i­nent cryp­tocur­rency Bit­coin has been trad­ing only seven years) and an ab­sence of proper un­der­stand­ing among the gen­eral pub­lic.

OP­POR­TU­NI­TIES

A dif­fi­cult po­lit­i­cal cli­mate notwith­stand­ing, there re­mains the pos­si­bil­ity that even re­gional rulers who main­tain strict po­lit­i­cal and eco­nomic con­trols on their govern­ment may find rea­sons to pro­mote the growth of cryp­tocur­rency.

Un­doubt­edly a busi­ness like Bit op­er­at­ing out of Bar­ba­dos has ben­e­fit­ted from the free and open econ­omy, and it serves as a guid­ing star for other Caribbean start-ups seek­ing to grow a cryp­tocur­rency busi­ness. Yet, if cryp­tocur­rency can serve not only as a com­mer­cial op­por­tu­nity but a pub­lic util­ity, then even tra­di­tion­ally pro­tected economies like Cuba with its dual cur­ren­cies, can iden­tify op­por­tu­ni­ties for com­mon sense re­form in the dig­i­tal arena.

This is es­pe­cially so when con­trasted against the his­tor­i­cal dif­fi­culty of cut­ting through red tape for elec­tronic pay­ments in the Caribbean. The rea­sons that are be­hind a slower take-up of cryp­tocur­ren­cies re­gion­ally be­come clear, and re­solv­ing these is­sues suc­cess­fully is surely be­yond the power of one start-up or even one na­tion.

Nonethe­less, just as the ob­sta­cles iden­ti­fied are sub­stan­tial, so too is there sub­stan­tial op­por­tu­nity for real progress within them. While re­stric­tive gover­nance has lim­ited eco­nomic growth in some na­tions among the Caribbean, the re­gion is also one with a ro­bust his­tory of open and trans­par­ent economies.

CON­CLU­SION

Cryp­tocur­rency will need to grow in the Caribbean busi­ness com­mu­nity along­side other fields in or­der to suc­ceed. Con­nec­tiv­ity re­mains a vi­tal con­sid­er­a­tion for the fu­ture of cryp­tocur­rency in the Caribbean. Cryp­tocur­rency can be global but if ac­cess to it is re­stricted on a lo­cal level‚ it will make no dif­fer­ence whether an as­pir­ing cryp­to­trader is in Ha­vana‚ Hokkaido or Ham­burg.

Con­versely, a small pop­u­la­tion pre­vi­ously lim­ited the po­ten­tial for na­tions like St Kitts and the Vir­gin Is­lands to fully seize upon their eco­nomic strengths. The shift to­wards a truly on­line, dig­i­tal econ­omy means chal­lenges sur­round­ing lo­cal pop­u­la­tion are now of lesser con­cern. A lo­cal cryp­tocur­rency start-up can gen­er­ate jobs, tourism and growth in the busi­ness sec­tor as a whole.

Ul­ti­mately, the fu­ture of cryp­tocur­rency in the re­gion will be im­pacted chiefly by na­tional pol­icy. An open and dereg­u­lated econ­omy will make the cre­ation of lo­cal cryp­tocur­rency busi­nesses eas­ier, whereas strict reg­u­la­tion and a cul­ture of sus­pi­cion sur­round­ing its rise will dis­en­cour­age growth.

If these chal­lenges can be ad­dressed, there is the po­ten­tial for sub­stan­tial gains. More than many other re­gions, the Caribbean has a dy­namic com­bi­na­tion of cul­tural di­ver­sity, prox­im­ity to large economies, and econ­omy trans­parency that all serve to make it a promis­ing arena for cryp­tocur­rency growth in the fu­ture.

Source: FT & Bloomberg

Bit­coin’s stag­ger­ing rise in value has at­tracted the at­ten­tion of in­sti­tu­tional in­vestors and pol­icy mak­ers.

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