how emerging markets are approaching crypto

Across nations from Brazil to Nigeria, individuals are adopting Bitcoin for purposes distinct from those commonly seen among investors in North America. Primarily, it serves as the most effective method for them to carry out international financial transactions. 

Consider the case of a 28-year-old poker player in Brazil, known only as Felipe for security reasons. As poker is a legal form of gambling within Brazil, Felipe is able to utilize Brazilian banks and authorized exchanges to generate income from home. He left his law studies behind, discovering that playing poker against international players for Bitcoin was more lucrative than pursuing a partnership at a local law practice. Felipe reports now earning more than his brother, who holds an executive position at a leading Brazilian corporation. 

“Bitcoin functions as the optimal means of monetary exchange within the poker world,” Felipe stated. “I convert my winnings into Bitcoin, or Tether, and then sell it on a Brazilian cryptocurrency exchange.”

Felipe expressed concern regarding his government, anticipating a severe economic downturn in the coming years. He recalls the 1992 impeachment of President Fernando Collor de Mello following the confiscation of funds from millions of citizens’ savings accounts to address national debt. Felipe is determined to prevent his bank account from being similarly depleted during the next crisis, leading him to accumulate Bitcoin as an alternative to conventional investments like stocks. 

“The existing pension system is fundamentally flawed,” Felipe observed. “The advantage of Bitcoin is that you don’t recognize its value until you actually need it.” 

Manuel Folgueiras is among the many Cuban citizens who have entered the Bitcoin ecosystem in the past year. This 33-year-old economist, having lost his job in the tourism sector in 2020, now sustains himself through various cryptocurrency-related endeavors. 

“Acquiring Bitcoin is challenging, as we lack access to exchanges and are frequently targeted by scams. Cuban banks do not maintain relationships with cryptocurrency exchanges,” Folgueiras explained. “Currently, I utilize Bitcoin for both savings and income, engaging in trading arbitrage. This requires the use of a VPN and carries significant risk. If an exchange identifies you as being from Cuba, your account will likely be suspended.”

Worldwide demand for Bitcoin has been surging since the onset of the pandemic in 2020, briefly driving dollar-valued prices past $34,000 in the first week of January 2021. For individuals in numerous developing economies, the appeal of Bitcoin stems from anxieties about the stability of their national economies, rather than purely speculative motives. Several countries experiencing rapid growth in Bitcoin markets, particularly in Latin America and the Middle East, are facing economic decline and harbor concerns that political restrictions could further jeopardize economic stability. 

For instance, following Western Union’s cessation of operations in Cuba, Bitcoin usage among Cubans has increased significantly. In a range of countries, changes in pandemic policies have limited access to the dollar-based financial system. 

Folgueiras estimates that he is one of approximately 80,000 individuals on the island involved in an informal brokerage operation known as Trust Investing, frequently labeled a Ponzi scheme by local technology experts. Essentially, the business promises to trade cryptocurrency on behalf of “investors,” offering them substantial returns. The project advertises returns of 200%, which appears unrealistic, and references dubious “partners” on the Trust Investing website. 

These partner companies are registered to individuals involved in various legal proceedings throughout Latin America, and both Panama’s Superintendencia del Mercado de Valores (SMV) and Spain’s National Securities Market Commission (CNMV) have issued warnings against trusting the Trust Investing company. Even Folgueiras concedes that many consider this business a fraudulent scheme. However, he maintains that the returns from the Trust Investing program are helping him cope with the challenging job market. It’s a risk – whether the company will deliver returns or abscond with his funds – that he is willing to accept. 

Furthermore, Folgueiras added, any Bitcoin-related activity in Cuba is inherently “risky.” Due to U.S. sanctions, there are few regulated and reliable exchanges currently serving Cuban customers. Aside from the remittance startup, BitRemesas, the last compliance-focused startup attempting to serve this market ceased operations in 2019. Consequently, many Cubans resort to dubious schemes or utilize WhatsApp instead. 

“Cubans acquire Bitcoin through WhatsApp groups and peer-to-peer trading. The most commonly used mobile wallets are Coinomi, Enjin Wallet, and Trust Wallet, as the majority of Cubans rely solely on mobile phones. It’s a mobile-exclusive market,” Folgueiras said. “Bitcoin has positively transformed my life and become a vital source of income. Cryptocurrencies also provide Cubans with a convenient way to shop online and send international payments or remittances.” 

This grassroots, mobile-centric environment is prevalent in many smaller nations with developing economies. Similarly, Fodé Diop, the founder of the Dakar Bitcoin Developers meetup in Senegal, informed CoinDesk last year that Senegal was not merely a mobile-first market; it was a mobile-only Bitcoin environment. Unlike North America and Europe, many emerging-market crypto communities exclusively use cell phones for all activities, from research and trading to storage. 

However, it would be inaccurate to assume that most Bitcoin users in emerging markets are excluded from the global banking system. In countries like Nigeria and Brazil, many entrepreneurs and gamers in the upper-middle class utilize Bitcoin to conduct legitimate business. According to data from the global peer-to-peer (P2P) markets LocalBitcoins and Paxful, Brazil alone recorded over $25.3 million in P2P Bitcoin transactions last year. 

Meanwhile, P2P Bitcoin volumes in Africa, specifically Nigeria, significantly exceed that amount, totaling $357 million. Tomiwa Lasebikan, co-founder of BuyCoins, reported that his Nigerian cryptocurrency exchange experienced a surge in monthly volume from an average of $5 million in December 2019 to $21 million by December 2020. 

He attributed this growth to several factors, including activists against police brutality, such as the Nigerian Feminist Coalition, who collected bitcoin donations after being denied access to banking services, and increased restrictions on Nigerians making international payments. 

“Many individuals in Nigeria are encountering difficulties renewing subscriptions, such as Spotify or Amazon, with their Nigerian accounts,” Lasebikan explained. “Then, in October, there was a substantial increase in interest in cryptocurrency, not just Bitcoin, for collecting donations to support protests against police brutality. Numerous activists had their bank accounts closed. Continued fundraising of this nature, both domestically and internationally, would have been impossible two decades ago.” 

He added that his exchange startup now serves approximately 12,000 active users each month. Nearby, Damilola Odufuwa, Binance’s communications lead in Africa, stated that her global exchange company hosted hundreds of virtual events for 70,000 Nigerian crypto novices in 2020. These educational programs covered fundamental concepts, trading strategies, and guidance on opening exchange accounts. 

“During the pandemic, it was challenging to import goods, including remittances,” Odufuwa said. “Now, there’s also a need to use cryptocurrency to donate [to activists]…we intend to at least quadruple our educational programming this year.”

Depending on an individual’s economic status, people are using Bitcoin to generate income from online games like poker, trading cryptocurrencies, or providing freelance services to international clients. Odufuwa noted that many of the new users she has seen during the pandemic aim to capitalize on their developer skills, not just engage in trading. Therefore, her company will offer more developer training related to the open-source Binance Smart Chain project. While it’s impossible to quantify precisely, it appears that at least hundreds of freelancers worldwide now rely on Bitcoin for income. 

José Rafael Peña, a Venezuelan journalist and a LocalBitcoins user in Latin America, has been earning the majority of his income in Bitcoin since late 2016. He estimates that cryptocurrency writing assignments account for 90% of his earnings. 

“Bitcoin, in certain situations, is a valuable tool, particularly when living in a country with an unstable economy and limited financial resources,” Peña said. “I started using Bitcoin because it allowed me to protect against the devaluation of the bolivar, even without a dollar-denominated bank account.”

In conclusion, Odufuwa stated that emerging markets have experienced “significant” growth since the pandemic began. However, Peña cautioned against equating this growth with a comprehensive “solution” to local governmental challenges. 

“Most people are simply trying to survive the crisis in any way possible,” he said. “Even here, crypto remains a specialized area.”