As the world progresses, we have less paper money in our hands. It is now common to manage our finances from various digital wallets that, in theory, facilitate the processes. But do residents in disadvantaged countries have the tools to use these platforms?
Some experts consider that cryptocurrencies and other virtual methods can be a solution in countries that depend on remittances, to generate faster and cheaper transactions. In addition, they think it could help underbanked communities, however, will these populations have access to virtual wallets?
Not all Latin American countries have major disadvantages, but there are some where the processes often range from complicated to impossible with problems of internet access, restrictions and little knowledge on the subject.
Is it easy to adapt? Obviously not, even if the population is persistent, the entrepreneurs are innovative and the authorities seem to ignore the drawbacks. Two of the best-known cases today are El Salvador and Venezuela, with virtual opportunities that help and hinder at the same time.
Early adopters of crypto, a risky decision?
El Salvador was the first country in the world to establish Bitcoin as legal tender. It has only been in place for a few months (since September 2021) but the cryptocurrency’s historic fall could be a major setback.
President Nayib Bukele bet on the new modality and, in addition, announced the creation of the Bitcoin City, a tax-free place ready to mine Bitcoin with its own geothermal power plant. According to the president, this measure will generate greater employment for the people who depend on the informal economy.
Although some traders and part of the population see the new measure as an opportunity, others consider it a very futuristic idea, since they do not know how to handle this type of platform. They have a more limited knowledge and less access to the virtual world. The study by the National Bureau of Economic Research reveals that only 20% of the population continued to use the Chivo Wallet application after they had spent the $30 bonus granted by the government to encourage its use.
The volatility of the currency worried different institutions that estimated that the country’s finances would be impacted. The IMF recommended reversing the decision to make Bitcoin the second currency in national use.
On the other hand, some experts consider El Salvador to be one of the best countries to test the use of Bitcoin on a large scale. According to information shared by the Spanish newspaper El País, the first source of income is remittances sent to relatives from the United States and many of the nationals do not have a bank account.
The need to digitize currencies
Venezuela was one of the first countries to launch its own virtual currency. Petro is managed by the government and was created with the vision of having a cryptocurrency to pay for certain services in Venezuela, such as gasoline. However, in its first months it was paralyzed and many users, who received tokens to use it, complained that the money disappeared when they tried to carry out transactions. Likewise, it is a reduced modality due to the lack of telecommunications infrastructure in stores to make payments.
The little confidence Venezuelans had from the beginning collapsed with these incidents, but the government of Nicolás Maduro continues to try to put it into practice through different measures. For their part, Venezuelans do not consider Petro one of the preferred cryptocurrencies.
Venezuela is the Latin American country with the highest volume of the Bitcoin cryptocurrency according to a study by Statista in April 2021. The country had in that period approximately 47% of the total cryptocurrency in the region. Both crypto and other virtual payment methods in dollars, have helped Venezuelans to circumvent the problems of loss of value of the local currency and cash shortages. According to the consulting firm Ecoanalítica, 67% of transactions within Venezuela are made in dollars, due to the loss of value of the bolivar.
Virtual transactions are becoming more common every day, however there are few options to save in dollars within the country. One of the most used payment methods by businesses inside the nation is the Zelle, a mechanism that works with U.S. banks, but not all the population has a bank account there.
Other platforms such as PayPal are also used, but commissions to change to bolivars can be 15% and direct payments between accounts range between 4 and 7% extra commission from the national business.
For Venezuelans, transactions are not easy, with failures in the telecommunications infrastructure and one of the slowest internet services in Latin America, as well as electrical failures, blocking of certain virtual wallets, platform restrictions to work with national accounts, difficulties withdrawing money from wallets and high commissions. However, Venezuelans do not give up, they continue on this slow obstacle race to survive in a digital world.
Image: Kanchanara