Q&A: Cryptocurrencies will get stronger, development players should get involved
Despite market turmoil and regulatory squeezes, the development sector needs to start being more open to the opportunities offered by Bitcoin and other cryptocurrencies, says Ray Youssef, chief executive officer of Bitcoin marketplace Paxful, Inc.
By Sara Jerving // 07 February 2018NAIROBI — The Chinese government took a hard stance against cryptocurrency this week, reportedly blocking its citizens from accessing platforms that offer cryptocurrency trading services. Following suit, several United States and United Kingdom banks have also blocked customers from using their credit cards to buy cryptocurrencies. But these actions are only going to make this forum of currency more popular, argued Ray Youssef, chief executive officer of Bitcoin marketplace Paxful, Inc., in an interview with Devex. And development organizations should get involved, he added, despite recent steep drops in their value. The development sector can use this type of currency to its advantage, he argues. Accepting cryptocurrency as payment for donations can take away the red tape that sometimes restricts donors from contributing to charitable causes. In December, Paxful launched #BuiltwithBitcoin, a program that encourages the cryptocurrency sector to contribute funds for humanitarian projects. Paxful donated $50,000 in Bitcoin for the construction of a Rwandan school. Zam Zam, an organization aimed at providing clean water in the developing world, is the implementing partner. Our conversation has been edited for length and clarity. How should the development sector be using cryptocurrency? Besides first accepting Bitcoin and learning about it, they should let everyone else know that they now accept it. There will be no more delays of bad payment methods. Honestly, that’s one of the things that has stopped me in the past from giving to charities. If you want to make a large donation, you can’t really do it through your credit card. All kinds of limits are flagged. How do you do it? Through a very messy bank wire? With cryptocurrency, it’s easy. All they have to do is put their address on their website, and boom, a donation is made, and they get an email later that says they received $10,000. There have always been issues with billing and buying online. It all depends on the payment method. Some charity organizations take PayPal, which would be cool if I had a lot of money on PayPal. But they should all accept Bitcoin. For a cryptoperson, it’s so easy to send the money. You would be surprised at how often I stopped donating because I had to go through a messy, slow system. Is this going to work with this card, in this country? How should development actors, such as charities, increase awareness of the fact that they are now accepting donations through cryptocurrency? Zam Zam is an ideal model. First, get a Bitcoin wallet and start educating yourself, then share your Bitcoin address. For extra credit, Zam Zam even began accepting other forms of cryptocurrency and have gotten donations in them as well. We invite everyone to join the #BuiltwithBitcoin initiative and to help create real lasting change for people around the world. They just need to get started, and once they see how easy it is to get cryptocurrency and how fast they can convert it to "local" money anywhere in the world with peer-to-peer services like Paxful, they will prefer to get all donations in cryptocurrency just as Zam Zam does. How can Bitcoin be used in countries with restrictions on cross-border cash movements? Bitcoin is the absolute liberator in countries where capital controls are present, whether foreign or domestic. For example, in Nigeria, if you have a bank account and a bank card, you are still limited to $100 worth of online purchases every month. You are not going to order an iPhone X or an Xbox, or pretty much anything, because you are limited to $100. Imagine how we in the West would try to live, if we had to face those same limitations. But people can get around those limitations using Bitcoin, cryptocurrency. Besides payments, there are also imports. A lot of people import cars in Nigeria from the U.S. and sell them in Nigeria for about 500 percent profit. They couldn’t do that once the Nigerian central bank started forbidding wiring U.S. dollars out of Nigeria. They wouldn’t convert naira to USD anymore because they didn’t have enough supply of USD or euro, or other foreign currencies. So, what did entrepreneurs do? They used Bitcoin. They find someone that wants that Bitcoin and is willing to wire them the money, then they just give them the bank wiring instructions of the auction house where they are going to buy. A person in Africa does not need an American bank account to buy an American car. They can use Bitcoin. It’s been reported that China’s Central Bank will block platforms involved in cryptocurrency trading and the issuance of initial coin offerings. Additionally, major banks in the U.S. and U.K. have blocked customers from using their credit cards to buy cryptocurrencies. What do you see as the future of cryptocurrencies given this resistance by both government and corporate entities? The future of cryptocurrencies is now brighter than ever. What began as a peer-to-peer software project to give people an alternative to the "infinite money machines" of a debt-based system is now further evolving. Centralized crypto exchanges are a vestige of a centralized asset system and are now in the process of being replaced by peer-to-peer marketplaces that are facilitating the movement from fiat to cryptocurrency. The underbanked populations of the world are leading this movement as they have been on the receiving end of the pain caused by "financial terrorism" in the form of sanctions, and capital controls both foreign and domestic. There is nothing that corporations nor governments can do to block peer-to-peer fiat to cryptotransactions short of arresting everyone involved in cryptocurrency. The more they tighten their grip, the more people will turn to these over-the.counter marketplaces as we see happening in China now. You may not be able to use your JPMorgan Chase bank card to buy Bitcoin from Coinbase directly, but you can use it right now on peer-to-peer marketplaces like Paxful and buy Bitcoins from another peer like yourself, who may have a bank account in the very same bank and there is little they can do to stop it. As another bonus to crypto, the more they impose these blockages, the more scarce the supply and thus higher the price. Do you anticipate that other governments and banks could also react in this way? We have two distinct stances being taken by governments. Japan has legalized cryptocurrency, Dubai is actively moving its administrative data structures onto the blockchain, and Venezuela is now beginning the most ambitious project of mass onboarding their entire population to cryptocurrency. They are driven by a sane and fact-based outlook on cryptocurrencies and the value they can add. Venezuela, in particular, has suffered terribly under intense sanctions and is taking the most ambitious measures. Venezuela is following the people of other emerging oil-rich nations like Nigeria that are turning to cryptocurrency en mass to protect their wealth, and restore their importing and exporting power. The Chinese administration, as well as Nigeria, have taken a negative stance and discourage or outrightly banned cryptocurrency. These are either Paxful's biggest markets or our fastest growing markets. Whenever they impose these blockages, they simply tell the people to turn to their neighbors to help them with their money problems. With a peer-to-peer currency like Bitcoin and peer-to-peer marketplaces like Paxful, the people can now truly solve their own money problems and create new wealth for themselves helping to onboard their neighbors into the world of cryptocurrency. We anticipate many more governments banning cryptocurrency outright in the next five years and for it to lead to the most massive growth cycle crypto has yet to witness. How is cryptocurrency being used in countries where inflation is a problem? A lot of people now are moving everything over to Bitcoin. It’s not the poorest of the poor that are doing this. This is the upper middle class that are looking for ways to move their money and preserve the value of their wealth. They are moving everything into Bitcoin. While their local currency might be rapidly depreciating, Bitcoin is generally trending upwards, usually, over a longer timeline. That works out pretty well for people. You can move over your life savings to Bitcoin, and you will be safe from inflation in most countries. It’s the only real hedge against inflation that some of these people, I think, have ever had. Some of them are trying to buy gold, some of them try to buy U.S. Treasury Bonds on the Forex, but they don’t have the liquidity of Bitcoin. This week the value of cryptocurrencies has dropped to below $6,000 for the first time since mid-November. Do these market movements impact the ability of cryptocurrencies to be seen as a safe haven for wealth in countries where there is high inflation? Most of our African community got into Bitcoin a year ago and since then their wealth would have increased by about 600 percent even after the crypto "crash." Even those Africans who got into Bitcoin at its height did so for different reasons than Western buyers. Nigerians know their local currency will go down by 50 percent or more each year, so they buy and hold long-term, while most Western buyers came in lured by media coverage of astronomical gains. People in emerging markets have a much more mature perspective on cryptocurrency and while short-term corrections may scare them, in the end, the volatility is better than outright degradation.
NAIROBI — The Chinese government took a hard stance against cryptocurrency this week, reportedly blocking its citizens from accessing platforms that offer cryptocurrency trading services. Following suit, several United States and United Kingdom banks have also blocked customers from using their credit cards to buy cryptocurrencies.
But these actions are only going to make this forum of currency more popular, argued Ray Youssef, chief executive officer of Bitcoin marketplace Paxful, Inc., in an interview with Devex. And development organizations should get involved, he added, despite recent steep drops in their value.
The development sector can use this type of currency to its advantage, he argues. Accepting cryptocurrency as payment for donations can take away the red tape that sometimes restricts donors from contributing to charitable causes.
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Sara Jerving is a Senior Reporter at Devex, where she covers global health. Her work has appeared in The New York Times, the Los Angeles Times, The Wall Street Journal, VICE News, and Bloomberg News among others. Sara holds a master's degree from Columbia University Graduate School of Journalism where she was a Lorana Sullivan fellow. She was a finalist for One World Media's Digital Media Award in 2021; a finalist for the Livingston Award for Young Journalists in 2018; and she was part of a VICE News Tonight on HBO team that received an Emmy nomination in 2018. She received the Philip Greer Memorial Award from Columbia University Graduate School of Journalism in 2014.