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Five Economies That Could Actually Use Bitcoin

As a fee-free platform for exchanging and storing and spending money, Bitcoin has a lot of potential in some volatile economies.
A Kenyan uses M-Pesa, the world's largest mobile payment system. Image: World Bank

The world's biggest cryptocurrency still needs to prove it can be a currency. Its instability makes it nothing like dollars and euros as a store of value. Since the start of the year, its value has declined more than copper, the Russian stock market, and the Nikkei. Bitcoin is also really hard to transact in because the exchanges where you buy bitcoins haven't just been unreliable; the biggest one collapsed with a lot of its users' money.

But that could be changing. As a fee-free platform for exchanging and storing and spending money, Bitcoin has a lot of potential in some volatile economies: because bitcoins don't rely on a middleman and aren't controlled by a central bank, they can bypass banking restrictions; because they're digital, they obviate the high fees, typically around 12 percent, that are often tacked on remittances from overseas and which a recent report says are "hurting the African diaspora."


Some believe that Bitcoin could bring modern banking to some 200 other economies whose access to global banking is restricted or whose currencies are themselves in dire straits (hola, Argentina). And in some of these places, far from Silicon Valley, adoption of Bitcoin is already edging closer to the mainstream.

Examining how Bitcoin is becoming part of the economic fabric in these countries yields some surprising lessons: Kenyans rely on the most developed mobile banking system in the world; Venezuela already uses a digital currency, by order of its late president Hugo Chavez. The following comparison isn't to suggest that Bitcoin functions like these economies' fiat currencies or could replace them. But for the purposes of this thought experiment, we can consider it a currency.


Argentina's economy is often cited as the perfect storm for mass Bitcoin adoption. This country has gone through hyperinflation in the past, and is now going through a round of currency devaluation. The rush to convert pesos to dollars has alarmed the government so much that dollar sniffing dogs have been deployed at airports. Amidst the growing crisis, the number of Bitcoin users in Argentina has grown at a rapid pace, and in December, Buenos Aires was home to the first Bitcoin conference in all of Latin America.

A short film about Bitcoin in Argentina (

One of the most interesting companies attempting to bring Bitcoin to Argentina right now is BitPagos. Sebastian Serrano, the CEO, describes his company as the opposite of BitPay. Many people are familiar with the idea of merchants immediately selling their bitcoins for local currency after receiving them as payment, but Sebastian and the rest of his team at BitPagos want to help merchants turn credit card payments into bitcoins.

While Bitcoin merchants in the United States want to avoid the volatility of the digital currency when accepting it as payment, Sebastian sees an opportunity to help those who wish to avoid the volatility of their local fiat currencies.



When a Ukranian developer named Yura sought donations for, his online information portal for the protests that undid Victor Yanukovich's rule, he asked the world for Bitcoin. The transaction record shows 20 BTC, or over $10,000, were donated to the cause over 111 transactions. He even received donations in the less-popular cryptocurrency Litecoin. "But you should understand," Yura told Motherboard, "that people in Kiev did much more for Maidan than all the financial support."

An interesting photo of a Russian bank (Sberbank) in downtown Kiev #Ukraine

— Amy Kellogg (@kellogglondon) March 5, 2014

Still, the use of Bitcoin in a political context was a reminder of its insulation from political pressure, the kind that kept Paypal, Visa, and Mastercard for processing payments for WikiLeaks in 2010. There are other interesting use cases for Bitcoin in a country undergoing political unrest and economic turmoil. When ATMs are running out of cash and banks are on the brink of default, an alternative currency begins to look more promising; you can't prevent someone from moving their Bitcoin wealth out of a country through an online transaction or brain wallet. The flexibility of bitcoins in these kinds of situations lends them a kind of intrinsic value that can in typical situations be much harder to see.

Photo: Flickr/public domain


India is currently dealing with relatively high rates of inflation, weakening the rupee, but the main argument for Bitcoin in India is the country's heavy use of international remittances. More money is sent to families in India, from places like the United States and the United Arab Emirates, where many Indians travel to work, than to any other country in the world. And Indians send a lot of remittances from their home country, too, to places like Bangladesh. Companies in the business of international remittances simply cannot compete with Bitcoin's extremely low fees, even as they try hard to do so.

Studies have shown that those sending remittances are at least somewhat price-sensitive: the cheaper it is to send money, generally, the more money will be sent. There were $67.6 billion worth of remittances sent to India in the last year on record, and this number has continued to grow on a yearly basis. Meanwhile, Bitcoin meetups are popping up all over the country, and the Bitcoin Alliance of India is trying to guide the government towards practical regulations around the digital currency.


Although international remittances offer a glimpse at Bitcoin’s value as a money transfer system, it's important to remember that this kind of service doesn't necessarily validate bitcoins as a currency. In the early instances of people using Bitcoin for international remittances, most people were converting their bitcoins back to the local currency once they have been received. But with a large segment of the population receiving international remittances in the form of bitcoins, it would be interesting to see shops and markets in, say, Kerela, begin to accept Bitcoin payments, obviating the cost of converting bitcoins into Indian rupees.

Photo by Scott Mainwaring / Flickr


Kenya is a world leader in mobile money. The mobile payment network M-PESA, which is thought to be the most developed of its kind in the world, boasts 18 million users in Kenya alone, thanks in no small part to the rate of mobile adoption: 93 percent of Kenyans have mobile phones. Compare the number of mobile payment users with the 10 million people who have bank accounts in Kenya, and it's clear that M-PESA is actually more popular than traditional banking options.

That reliance on mobile banking makes Bitcoin a natural fit. And because Kenya is another large hub of international remittances, Bitcoin transactions through mobile phones have an even greater chance for adoption. Kenya’s currency also makes the argument for Bitcoin: the Kenyan shilling is not the most stable currency in the world, and inflation rates have been known to creep above 15 percent from time to time.


The technology for Bitcoin transfers here already exists: last summer,the global Bitcoin wallet Kipochi began allowing people in Kenya to purchase bitcoins with their mobile phone through M-PESA, aiming to undercut money transfer companies like Western Union and MoneyGram. New startups like BitPesa and Bitcoin Tablet are following suit.

Pelle Braendgaard, co-founder of Kipochi, explained his goal to CoinDesk, saying “we believe Bitcoin can truly help people in the developing world and wanted to develop a mobile wallet for it that works in a similar way to what people are already using.”

Carlos Garcia Rawlins/Twitter


Venezuela hasn't received as much attention as Ukraine when it comes to recent political uprisings, and that could have something to do with the government kicking foreign media outlets out of the country, and in some cases reportedly turning off access to the internet. But considering current political and economic upheavalcapital controls and the prevalence of cell phones. Venezuela is one of the few countries in the world where bitcoins already look like a solid alternative to the local currency.

The inflation rate in Venezuela for 2013 was over 50 percent, offering an incentive to Venezuelans to switch to another store of value. Yes, the price of a single bitcoin has crashed by 50 percent on more than one occasion, but the price also surged by 5,000 percent over the course of 2013. The long term trend of the Venezuelan bolivar is down, while the long term trend of the bitcoin is up. It's true that holding bitcoins is a gamble—the price could go to zero tomorrow. But Bitcoin can look like a better option, at least for a brief time.

Hugo Chavez recognized the value of digital currency too: in 2010 he ordered the creation of the sucre, a government-backed virtual currency intended to be used to dethrone the dollar as the currency of choice for trading between Venezuela and its regional partners, like Ecuador and Bolivia.

So far, it's only been used to trade with Ecuador, whose companies exported $737 million worth of goods to Venezuela using the sucre system in the first nine months of 2013, an 80 percent increase over the same period in 2012, according to Ecuador's central bank. But the currency is designed as a medium of exchange for foreign trade, bought and sold in local currencies, and can't be used directly as a store of value by consumers.

But neither can Bitcoin, not yet. For Bitcoin to be truly useful as a currency, it needs stability. And yet, even as regulators seek to define its legal and tax boundaries, bitcoins can look like a better store of value than some of the world's worst currencies. Instead of being trapped in an economy where savings can be inflated away and where the costs of sending money are high, Bitcoin could be not just a valuable technology but, in some places, a sign that alternative currencies can thrive alongside the money that governments print.