By Mary Ann Callahan
Caribbean News Now guest contributor
In 2017, cryptocurrency made itself heard. It’s clear that cryptocurrency and blockchain in general are not just fads but are here to stay. Organizations from governments to banks to small startups are racing to get ahead in what’s seen as an exciting new field that could be as revolutionary as the Internet itself. Even J.P. Morgan Chase Chairman and CEO, who called Bitcoin a ‘fraud’ back in September, has retracted his hard stance on digital currencies and stated in January of 2018 that ‘blockchain is real’. J.P. Morgan Chase itself has invested in the research and development of blockchain technology that will improve its global payments system by reducing transaction times from weeks to hours.
Although J.P. Morgan Chase is a clear leader in the global financial system, organizations and people in other parts of the world that aren’t necessarily as predominant have looked at blockchain and cryptocurrency in order to improve poor economic conditions or try to assert leadership in an area that is still very much up for grabs.
One region where cryptocurrency has surprisingly been on the rise is the Caribbean, a region that has been plagued by slow economic growth and high levels of debt in recent years. While governments of more developed nations, such as China and the United States, have shown their reluctance when it comes to embracing cryptocurrencies and Bitcoin exchange regulation, governments of Caribbean nations like Puerto Rico and members of the Eastern Caribbean Currency Union (ECCU) have shown their eagerness to embrace and learn about cryptocurrency in order to improve their countries. Moreover, the public and private sectors alike have been exploring cryptocurrency for the purpose of improving regional trade, which has been hit hard by the pulling out of big international banks and lack of foreign reserves. Lastly, since much of the Caribbean is underserved when it comes to banking services, Caribbean countries are turning to cryptocurrencies, such as Bitcoin, to provide better financial services for its citizens.
Caribbean Governments Show Cryptocurrency Initiative
Perhaps the biggest impediment to cryptocurrency adoption is government regulation. Since governments control the financial system and general flow of money, crackdowns, such as the Chinese government ban on ICOs, can have a huge impact on cryptocurrency adoption and usage.
Caribbean governments, on the other hand, have shown surprising initiative in welcoming cryptocurrency and exploring its uses to improve local economies as well as the Caribbean’s presence in a field where there is yet to emerge a clear leader.
In particular, one government that has shown its willingness to lead is the Puerto Rican government. In 2017, Puerto Rico was absolutely devastated by the monster Hurricane Maria. Infrastructure throughout the island was wiped out and even today, hundreds of thousands of people are without food, power, and more.
Puerto Rico is in desperate need of a miracle, and cryptocurrency could be the boost it needs to get the economy as well as country back on track.
In many countries, cryptocurrency is still somewhat of a fringe movement, with discussions on the topic taking place amongst small groups of enthusiasts in informal settings. On the other hand, in Puerto Rico, Governor Ricardo Rosselló himself will be a keynote speaker at Blockchain Unbound, a conference coordinated by the Puerto Rico Department of Economic Development and the Governor’s office that brings together Puerto Rican officials and top blockchain and cryptocurrency luminaries like Alena Vranova, Managing Partner of Satoshi Labs, which makes the popular cryptocurrency hardware wallet TREZOR and runs Slush Pool, one of the world’s biggest Bitcoin mining pools.
It’s not just Puerto Rico though. Eight Caribbean Island economies, which comprise the Eastern Caribbean Central Bank (ECCB), are even considering issuing their own cryptocurrency called the Digital Eastern Caribbean dollar (DXCD).
Cryptocurrency to Improve Regional Trade and Consumer Prices?
When it comes to regional trade, the United States Dollar (USD) is king for the exchange of goods and services. However, “de-risking”, or the pulling out of big international banks from the Caribbean region in response to US authorities labeling the Caribbean a money-laundering haven and levying fines on banks who aid money-launderers, has left Caribbean banks and businesses with a shortage of foreign exchange reserves (USD), which has hurt regional trade tremendously.
In response, startups, such as Barbados-based Bitt and Caribbean central banks, have been exploring the creation of digital currencies to boost regional trade, which could also ultimately lead to better prices for consumers since the foreign exchange costs associated with exchanging local currencies for USD and back in the traditional trade system would be eliminated or reduced significantly with the use of digital, blockchain-based currencies. Improved profit margins from less foreign exchange costs could mean that businesses would offer better prices to customers.
Ryan Peterson, General Manager for Economic Policy at the Central Bank of Aruba has forecasted that the introduction of a digital currency system would lead to 4-5% GDP growth for Aruba alone, which is significant, considering the region hasn’t seen more than 0.5% growth for over 20 years.
Cryptocurrency as a Way to Fill the Void in Caribbean Banking Services
According to a 2015 World Bank report, about half of the Caribbean population is unbanked. In other words, 1 in 2 people do not have basic banking services, such as a bank account. Combined with the news of de-risking throughout the Caribbean, this situation doesn’t look like it’s going to get any better.
Interestingly enough, in countries where traditional finance is failing, cryptocurrency is stepping in as a legitimate alternative.
In 2016, UK-based startup Caricoin launched a Bitcoin wallet in the Caribbean for those who don’t have access to basic financial services. Users are able to send and receive Bitcoin without fees and even top-up their mobile phone minutes.
While this doesn’t seem like a big deal for people in countries with developed financial institutions, this is huge for regions like the Caribbean, because now people can access, store, and move around their wealth securely rather than do something like stuff their money in their mattress.
Most agree that it’s still very early in cryptocurrency. 2017 really saw interest explode with the meteoric rise in price of cryptocurrencies like Bitcoin as more and more people are seeing the potential of what the technology can do for the world. While one would expect global leaders like the United States to take up the cryptocurrency mantle, this has not been the case. For example, US citizens can’t really invest in initial coin offerings (ICOs) because most blockchain and cryptocurrency startups don’t want to deal with the onerous regulations of the US Securities and Exchange Commission (SEC) and risk getting fined millions or even billions of dollars.
Instead, regions like the Caribbean have surprisingly taken the lead on exploring cryptocurrency uses and benefits with top leaders in government taking part in crypto-promotion, governments and businesses working together to use cryptocurrency to improve the embattled regional trade system, and cryptocurrency startups looking to fill the void in traditional financial services for Caribbean citizens.