Bitcoin, the first and most well-known cryptocurrency, recently surpassed all-time highs of around $20,000 per coin. After plummeting to just $5,200 in March, the digital currency has increased by more than 350 percent in nine months and is now trading at just under $24,000.
Though critics point to Bitcoin’s volatility as its Achilles’ heel, news of corporate adoption aided the cryptocurrency’s steady price rise this year. For example, in early October, American payments company Square purchased 4,709 bitcoins (worth approximately $50 million) for investment purposes. PayPal then announced that US users would be able to buy, hold, and sell bitcoin on its platform.
In terms of regulation, the Indian Supreme Court in March this year reversed a decision to lift a ban on cryptocurrencies, and the majority of Southeast Asian countries continue to move toward legalizing the sale of cryptocurrencies. While some governments prohibit the use of cryptocurrencies for payment, many central banks in ASEAN permit the operation of exchanges.
Therefore, with growing global adoption, why does Myanmar continue to lag behind the rest of the world in terms of a clear cryptocurrency policy? And, if the Myanmar Central Bank (CBM) were to reverse course, how would ordinary citizens benefit from the crypto revolution?
Reactions of central banks
The CBM has issued two statements regarding cryptocurrencies, both of which were issued following significant price increases. Neither statement clarifies what cryptocurrencies are, but both caution users about potential risks.
A first notification was issued last year, on May 3, 2019, following a 17 percent increase in the Bitcoin price from $4,150 to $4,879. The notification specifies Bitcoin, Litecoin, Etherium, and Perfect Money as the four primary currencies. Perfect Money is a popular e-payments system in Myanmar, where users can purchase digital gold, bitcoin, and fiat currencies.
A year later, on May 15, the central bank issued a more severe warning in Notification 9. The notification asserts that it is intended to “protect individuals from financial loss associated with the use and trading of digital currencies.”
Notification 9 is more explicit in its identification of cryptocurrency traders, focusing on those who use “their personal Facebook accounts or web pages for themselves or who work as providers [of cryptocurrencies]”. Those who violate the order will face prosecution, though the penalty is not specified.
The order was issued following Bitcoin’s dramatic one-day 12.7 percent increase from $7,807 to $8,801 two weeks prior. Given that the price has increased by 151 percent since last May’s announcement, and by an even greater 371 percent since then, these increases have sparked increased interest among Myanmar citizens – ironically, much of the discussion takes place on Facebook pages devoted to cryptocurrencies.
Therefore, given Myanmar’s exclusion from the recent price surge, what are the potential benefits of adopting a more crypto-friendly mindset?
According to the Department of Labour, the estimated inflow of funds from overseas workers back to Myanmar was more than $500 million last year. The estimates provided by the department are conservative, as they are based on data from official sources. When unofficial channels such as personal bank transfers and physical cash are included, the World Bank estimates the figure to be closer to $2.4 billion.
While recent fintech developments in Myanmar have enabled bank-to-bank and peer-to-peer payments, allowing the country’s vast unbanked population to send money across the border, Myanmar’s financial infrastructure continues to struggle with international money transfers.
While agreements between local and international banks and remittance service providers such as Western Union have aided, they are inconvenient for the majority of Myanmar’s migrant workforce.
Over the last four years, blockchain-based remittance companies have grown in popularity throughout the world, particularly in countries such as the Philippines, East Africa, and South America. Blockchain technology enables users to conduct transactions more quickly by circumventing the more cumbersome inter-bank settlement system. Anonymity and privacy are also provided by the blockchain’s public ledger system and private encryption.
These features have been particularly appealing to overseas Filipino workers, who were among Southeast Asia’s early adopters of cryptocurrency for remittances. Coins.ph was founded in 2014 and is one of the region’s first blockchain-based platforms, serving over 10 million Filipino customers globally. The company, which utilizes the same app interface as Coins.co.th, leverages its network of over 30,000 partners in The Philippines to facilitate cryptocurrency-to-cash transfers, withdrawals, and deposits.
Everex, a blockchain-based company, signed a deal with Shwe Bank and Krungthai Bank last year, targeting Thailand’s over three million Myanmar workers. Everex’s value proposition was based on the use of stable coins backed by fiat currency, which can be withdrawn immediately as cash upon receipt.
The company has since exited the Myanmar market, possibly due to regulatory uncertainty surrounding cryptocurrency. Myanmar’s central bank may benefit from following the lead of Thailand and the Philippines in promoting financial inclusion for those without access to a basic bank account – both within and beyond its borders.
Another cross-border application of cryptocurrency in Myanmar is the tourism industry’s use of tokens or blockchain-based currencies.
Prior to the COVID-19 restrictions, Myanmar welcomed over four million visitors in 2019, with many arriving via other Southeast Asian countries.
While currencies such as the Thai baht are relatively easy to convert across the continent, the Laotian kip, Vietnamese dong, and Myanmar kyat are significantly more difficult. Myanmar money changers also require only the cleanest, crispest US dollars, making currency exchange difficult, if not impossible, upon arrival.
In 2013, Elizabeth Rossiello, CEO and founder of the foreign exchange blockchain platform AZA, cited similar reasons for establishing her African-based payments company. Rossiello, based in Nairobi, sought to resolve liquidity issues associated with cross-border transactions involving the continent’s 54 different currencies.
Rossiello highlighted the difficulty of transacting between currencies such as the Nigerian naira and the South African rand last year at the Hong Kong Fintech Conference. Typically, this currency pair requires the purchase of US dollars as an intermediary currency, increasing transaction costs and requiring phone calls from multiple banks. Other currency pairs are more expensive to exchange, requiring the acquisition of euros from banks in Europe and remittance to Africa to settle transactions.
While Myanmar’s banking and currency exchange system is less complicated, current fintech payment apps have their own set of issues. One of them is the inability to conduct cross-currency transactions. Additionally, WavePay and OKDollar require operators to make phone calls to confirm deposits. These may be teething problems for the time being, but blockchain technology has the potential to completely circumvent these human limitations.
Apart from facilitating transactions, blockchain-based technology is capable of generating and capturing data that may be beneficial to tourism operators. Using blockchain applications, it is possible to store itineraries, make hotel reservations, and even activate location-based services, such as verifying pick-ups and arrivals.
According to Phillip Lim, founder of Myanmar’s leading blockchain services platform SKYBIT, more than 99.9 percent of the world’s wealth is located outside the country. That is a roundabout way of saying that Myanmar is impoverished in comparison to other countries.
If regulated by the central bank, cryptocurrency exchanges enable direct transfers from overseas donors to recipients in Myanmar. From the construction of schools, libraries, and education centers to the funding of conservation initiatives, exchanges provide a means for funds to enter Myanmar without encountering the friction associated with established banks and finance companies.
The Litepaper published by SKYBIT details the advantages of cryptocurrency for charities and community organizations in Myanmar. Myanmar received only 0.77 percent ($1.17) of total global official aid ($153 billion) in 2015. With an isolated banking system, aid donors struggle to secure international funding for their organizations, which means that potential funds from international donors simply go elsewhere in the world.
One possible solution is a decentralized lending and borrowing platform: “SKYBIT’s DeFi Lending and Borrowing app will target people in Myanmar seeking to borrow money, while lenders can be located anywhere in the world.” It will accept collateral in the form of approved tokens, which will primarily be tokens backed by relatively stable assets such as real estate.”
Such developments are audacious and have the potential to resolve a slew of issues inherent in the current banking system – not just in Myanmar, but globally. However, without regulatory support, it’s difficult to envision how these innovations will shape Myanmar’s future in an increasingly digital, and increasingly blockchain-focused, world.
Leaving the past behind
Myanmar remains a cash-based economy, despite the advances made by digital payment providers over the last decade. However, given the economy’s decades of mismanagement, isolation, currency crises, and devaluations, many people are wary of using cash. During periods of high inflation, generations of people have historically turned to gold or gems as inflation hedges.
Bitcoin is an appealing alternative for savers and speculators alike in the digital age, particularly among the growing number of tech-savvy youth and those returning from overseas.
Apart from the current price gains, cryptocurrencies and blockchain technology offer much more than just a means of exchange. And, as corporate, consumer, and government adoption continues to accelerate elsewhere, it is up to Myanmar’s numerous technology experts and developers to assist in bringing the central bank into the twenty-first century.