While critics regarded the volatility of a site as the Bitcoin heel of Achilles, the news of corporate adoption this year helped the cryptocurrency’s steady rise in price. In early October, for example, the American payments company Square bought some 4,709 (about $ 50 million) of bitcoins for investment purposes. The news was followed by PayPal’s announcement that it would allow US consumers to buy, hold and sell bitcoin on its platform.
In terms of regulation the Supreme Court of India overturned a decision to revoke a ban on cryptocurrencies in March this year, and most countries in Southeast Asia continue to move towards legalizing the sale of cryptocurrencies. While some governments prohibit the use of cryptocurrencies for payment, many ASEAN central banks allow exchanges to operate.
So, with increasing global adoption, why is Myanmar still lagging behind the rest of the world in terms of clear policy on cryptocurrencies? And if the Myanmar Central Bank (CBM) changed its mind, how could ordinary people benefit from the crypto revolution?
Central bank responses
The CBM has released two statements relating to cryptocurrencies, both of which were issued after significant price increases. Neither statement helps explain what cryptocurrencies are, and yet both warn consumers of their potential pitfalls.
A first notice was published last year, on May 3, 2019, after the price of Bitcoin jumped 17pc from $ 4,150 to $ 4,879. The notice lists the four major currencies such as Bitcoin, Litecoin, Etherium and Perfect Money. Perfect Currency is an e-payments system popular with Myanmar users, and allows the purchase of digital currency, bitcoin and fiat currency.
A year later the central bank issued a stricter warning in its Notice 9 on May 15. The notice claims it “protects people from financial loss that would occur when using and trading digital currencies”.
Notice 9 is clearer when identifying individuals trading cryptocurrencies, highlighting those who “use their personal Facebook accounts or web pages for themselves or who work as providers [of cryptocurrencies]”. Those who breach the order will be prosecuted, although the penalty is not stated.
The order was released after a sharp one-day rise of 12.7pc Bitcoin two weeks earlier, from $ 7,807 to $ 8,801. Given that the price has increased by 151pc since then, and 371pc even higher from last May’s announcement, these rises have sparked increased interest from Myanmar’s citizens – ironically, much of the discussion is happening on Facebook pages related to cryptocurrencies.
So since Myanmar has missed out on the recent price boom, what are the potential benefits of adopting a more crypto-friendly mindset?
Last year, the inflow of money from foreign workers back to Myanmar was estimated at over $ 500 million, according to the Labor Department. The department’s estimates are conservative, given that the figures are based on data from official sources. Adding unofficial channels, such as personal bank transfers and physical cash carry, the World Bank puts the number closer to $ 2.4 billion.
While recent fintech developments in Myanmar have allowed for bank-to-bank and peer-to-peer payments, enabling the country’s vast unbanked population to transfer funds nationwide, Myanmar’s financial infrastructure is still struggling with international money transfers.
Agreements between local and international banks and payment service providers such as Western Union have certainly helped, but these are not practical for most of Myanmar’s migrant workforce.
Blockchain-based transfer companies have grown in popularity worldwide over the past four years, especially in places like the Philippines, East Africa and South America. Blockchain technology makes transactions faster, enabling consumers to avoid a more onerous interbank settlement system. The blockchain’s public ledger and private encryption system also provides anonymity and privacy.
These features have been particularly attractive to foreign Filipino workers, who were early adopters of cryptocurrency for payments in Southeast Asia. Founded in 2014 Coins.ph is one of the earliest blockchain supported platforms in the region, and now serves over 10 million Filipino customers worldwide. Using the same app interface as Coins.co.th, the company uses its network of over 30,000 partners in the Philippines to assist with cryptocurrency-to-cash transfers, withdrawals and deposits.
Last year, the blockchain-based company Everex, signed an agreement between Shwe Bank and Krungthai Bank, targeting the over three million Myanmar employees in Thailand. Everex’s value proposition was the use of fiat currency backed fixed coins, which can be withdrawn directly as cash when received.
The company has since left the Myanmar market, perhaps due to uncertainty over cryptocurrency regulations. Myanmar’s central bank may benefit from following the leadership of its counterparts in Thailand and The Phillipines, helping to increase financial inclusion for those without access to a basic bank account – within, and across, its borders.
Another cross-border use case for cryptocurrency adoption in Myanmar is the use of tokens or blockchain-based currencies in the tourism industry.
Prior to the COVID-19 restrictions Myanmar received over four million arrivals in 2019, with many travelers passing through other Southeast Asian countries before arriving.
While it is easier to convert currencies such as Thai baht across the continent, the Laos kip, Vietnam dong and the Myanmar kyat are much less so. Myanmar’s money changers also insist on only the cleanest, crunchier US dollars – which makes it difficult, and sometimes impossible, to change money on arrival.
Elizabeth Rossiello, CEO and founder of the AZA foreign exchange blockchain platform, cited similar reasons for creating her African payments company back in 2013. Based in Nairobi, Rossiello wanted to overcome the liquidity issues that arose with cross-border transactions between the 54 different currencies were trading across the continent.
Speaking at last year’s Hong Kong Fintech Conference, Rossiello highlighted the problem with negotiations between Nigerian naira, for example, and the South African rand. This currency pair typically involves buying US dollars, such as intermediary currency, increasing transaction costs and even including phone calls from several banks. Other currency pairs are more expensive to swap, and include buying euros from banks in Europe, before sending them back to Africa to settle transactions.
While Myanmar’s banking and currency exchange system is less onerous, current fintech payment apps are not without their own issues. One of them is the inability to negotiate across currency. WavePay and OKDollar also sometimes include operators who need to make calls to confirm deposits. These may be initial issues for the time being, but blockchain technology can completely bypass these human limitations.
Apart from being able to facilitate transactions, blockchain-based technology can also generate and capture data that tourism operators may find useful. Itineraries, making hotel bookings and even activating location-based services, for example for pick-up and arrival, can all be stored via blockchain applications.
According to Phillip Lim, founder of Myanmar’s leading blockchain services platform, SKYBIT, over 99.9pc of the world’s wealth exists outside the country. That’s a roundabout way of saying that Myanmar, relative to other countries, is poor.
Cryptocurrency exchanges, if regulated by the central bank, allow for direct transfers from foreign donors to recipients in Myanmar. From building schools, libraries and education centers to financing conservation initiatives, exchanges are channels where funds can reach Myanmar, without the friction associated with existing banks and finance companies.
The SKYBIT Letter Paper demonstrates the benefits of cryptocurrency to charities and community organizations in Myanmar. According to the paper, Myanmar received only 0.77pc ($ 1.17) of the world’s total official aid ($ 153B) in 2015. With a banking system disconnected from the rest of the world, aid donors find it It is difficult to attract international funding to organizations, which means that potential funds from international donors are going elsewhere in the world.
One possible solution is a decentralized lending and lending platform: “The SKYBIT DeFi Lending and Borrowing app will target people in Myanmar who would like to borrow money, while lenders from anywhere in the world can. It will receive collateral in the form of tokens from an approved list consisting primarily of tokens backed by relatively fixed assets such as real estate. ”
Such developments are ambitious, and potentially solve many problems inherent in the current banking system – not only in Myanmar, but worldwide. But without regulatory backing, it is difficult to predict how these innovations can shape Myanmar’s future in an increasingly digital, and now blockchain-focused world.
Break with the past
Despite the progress made by digital payment providers over the last ten years, Myanmar is still a cash-based economy. But given that the economy has suffered under decades of mismanagement, isolation, currency crises and devaluations, people also have doubts about using cash. Under periods of high inflation, generations of people traditionally turn to gold or pearls as hedges against inflation.
In the digital age Bitcoin is an attractive alternative for savers and speculators alike, especially among the growing number of technologically savvy youths or those returning from abroad.
But aside from the current price gains, cryptocurrencies and blockchain technology have more to offer than simply a store of value. And as corporate, consumer, and government adoption continues rapidly elsewhere, there are up to Myanmar’s many technology industry experts and developers to help bring the central bank into the 21st Century.