Bullish trends made May of 2019 a 10-month high point for Bitcoin, pushing it in the neighbourhood of $8.500 only to make it drop by 10% in the next 24 hours. It is hard to tell whether this heralds renewed interest in crypto, but blockchain projects have many benefits to deliver regardless of the crypto market’s state.
BYPASSING SANCTIONS BY BITCOIN?
It seems Bitcoin will not be able to live up to the expectations of a decentralized currency impervious to geopolitical games. At least not on exchanges as Finnish based LocalBitcoins has recently terminated its services to Iranian citizens without providing proper explanation.
The move prompted some crypto enthusiasts to opine that Bitcoin is devolving toward the status of fiat currency. An exaggeration considering its properties. Sanctions are of course the most likely suspect for the ban of the exchange whose popularity in Iran was due to its KYC policy that did not require international bank card information.
Still, open source fintech of blockchain holds a promise of a truly decentralized exchange insensitive to nationalities that may be used by countries trying to prevent the crippling effects of sanctions on commerce.
In cases when financial institutions withdraw from a certain region for reasons of security or international sanctions, they may leave behind a gap affecting the segment of the more economically vulnerable local population which loses access to financial services.
BLOCKCHAIN REMITTANCES AND DEVELOPING COUNTRIES
Blockchain could play an important role in providing and reducing remittance costs for the Global South. Recent research concludes banks are the most expensive service providers, while remittance costs average almost 11% in Sub-Saharan Africa.
Additionally, international aid going to developing countries tends to lose up to 10% of value due to transaction fees and exchange rate fluctuation, not to mention the possibility of illicit intermediaries and corrupt officials.
Land registry and identity (KYC, AML) are the two features of commerce where blockchain can be of great help to developing countries where transparency and trust can be an issue preventing established financial institution from engagement with the local financial infrastructure.
Finance is not the only area to benefit from blockchain. Education sector might also welcome decentralized record of attendance and performance, while verifiable flows of information could be used to track human rights violations.
Cryptocurrencies find themselves in an interesting position. The trend toward legal compliance is irreversible as larger players are ready to benefit from this evolving technology. At the same time, crypto markets benefit from restrictions on traditional finance such as sanctions, capital controls imposition and tariffs.
When fiat is swapped for crypto at a higher rate than new crypto is issued, a market rally follows. The question is, when will regulation be at the level where institutional money can pour into crypto markets and give it a new shape in terms of volume and stability.
There is a certain tension between the fully compliant crypto space and crypto as an alternative for those left out by the traditional system. One might expect that the crypto space will develop in both ways. In the future, a regulated network of crypto exchanges and services might exist alongside decentralized exchanges with intense trading by those with no access to regular services.