CAN THE CARIBBEAN BECOME THE NEXT CRYPTOVALLEY?
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.
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?
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.
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.
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.
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.
Bitcoin’s staggering rise in value has attracted the attention of institutional investors and policy makers.