Cryptocurrency startups rushing to real world use in Southeast Asia
Disruption doesn't always bite at heels. Sometimes it begins with a headstart then just grows the lead.
Where possible, the trick to successfully using cryptocurrency for real world applications might be to just do it. This is because digital currency is extraordinarily practical. Its advantages, such as being programmable, transferable, trackable and easily automated have landed cryptocurrency startups with a major leg up on their established non-crypto competitors. These benefits let crypto startups do with two people what banks have typically done with twenty, and are more than enough to make a real difference.
This is currently driving real world cryptocurrency adoption across Southeast Asia.
Consider Phnomh Penh-based DApact. It's a straightforward microfinancing platform run on the Ethereum network, designed to offer cheap micro loans where they're most needed. It automates every step of the process and uses the Ethereum network to move funds where possible, letting it operate at about a third of the cost of other lenders to offer financing at much more competitive flat rates, through a local network of already-licensed pawn shop lenders who receive 5% flat commission on each payment.
"[Digital token-based loans are] absolutely much better than the traditional ones," said one borrower Sachaknisay Sov, to the South China Morning Post (SCMP). "It has a lower interest rate."
Typical rates for him were previously 18% of the total, but now he's paying a flat 5% on each repayment.
Southeast Asia is an especially ripe area for disruption, thanks to the combination of serious under banking and high mobile use.
As of 2016 KPMG estimated that 70% of people across Southeast Asia didn't have a bank account. At the same time, average time spent on a phone is much higher than most other regions. A similar trend has led to crypto disruption in Africa, where digital currencies are technologically leapfrogging traditional banking just like mobile phones leapfrogged landlines.
DApact takes advantage of this by automating its borrower registration, AML/KYC and collateral registration through a Facebook Messenger bot. It collects the basic information required, and lets users register motorbikes as collateral through its licence number, automatically checking its value against the national vehicle registry.
Other services make similar moves, and the remittance sector might be one of the more obvious industries up for disruption. According to the SCMP, it would cost a Filipino caregiver in the United Arab Emirates US$8.52 to send $200 to the Philippines. However, the Coins.ph app uses bitcoin to do it for less than half that.
The system is extremely straightforward. It simply involves sending bitcoin rather than fiat currency, and using a network of cryptocurrency exchanges in different countries for the fiat conversions. Essentially, the cross-border part of the trip involves cryptocurrency while the local movement is done cheaply with fiat. It's easy enough that an Argentinian bank recently became the first bank in the world to start using bitcoin for live customer cross-border payments. And doing so was as easy as partnering with an amiable cryptocurrency exchange and just doing it.
This is exactly the same system used by Ripple. It simply transfers funds over the blockchain and uses local cryptocurrency exchanges to cash it out. As cryptocurrency becomes increasingly normal and less mystical, the regulatory barriers that block its use for remittances seem increasingly outdated.
And as it becomes more normal it's increasingly clear that the recipe for cryptocurrency success might be to just do it.
As Moody's has warned, laggards will start feeling the pain of blockchain disruption. And as the day-to-day prevalence of cryptocurrency in Southeast Asia warns, digital currency is already the new status quo in some places.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, NANO