It is certain that Bitcoins are challenging and changing the mechanics of payments on the Internet. What started as a very elegant solution to the Byzantine Generals Problem published in a paper by someone called Sataoshi Nakamoto, and 3 months later the first Bitcoin protocol code that was released in 2008, is now an Internet currency with a market capitalization of just shy of $12 Billion (as of 26th Jan. 2014).
The world’s accepted methodology for payments is indeed being questioned!
Is being challenged.
Is being changed!
Question is what is Pakistan going to do about it? Will we have a knee-jerk reaction and see what the neighbor to our right (or left) does first and then follow suit? Would we be dictated y the US Government or the lending authorities such as IMF or the World Bank or will take a thoughtful sovereign stance and embrace Bitcoins?
Will Pakistan let the new currency flourish within our economy by accepting it or will we suppress its usage and trade? The decision can be very simple, yet somehow, I fear, we will have politicians and technocrats with scanty knowledge, elongate this debate and kill it. I hope it is the former than the latter.
Where is the Market for Bitcoin in Pakistan?
There are two important elements to study briefly, before we can make an argument for Bitcoins.
- Pakistan has approximately 21 Million Debit cards that are associated with one of the two card schemes, namely VISA or MasterCard. Additionally, there are 1 Million (approximately) Credit Cards (again associated with either VISA or MasterCard). Each day the number and value of the transactions on these cards is increasing, which implies that for every charge done, about 4-5 cents per transaction goes to VISA or MasterCard. Lets not even discuss the 3.0% charge and how that is split amongst the acquiring banks, the issuing bank and the card scheme authority itself. Literally, millions of transactions happen in a given year and that number is expected to increase (not decline). This implies that a significant numbers of US Dollars gets shipped out of this country for the mere fact that we are using a network with some odd behavioral characteristics, a branded name, where the transaction is local, the money is local, the merchant is local and the bank is local. Yet, just to enable this transaction on a common denominator network, we have to pay money outside of this country to enjoy this privilege.
- Pakistan is one of the leading countries in the world which relies heavily on incoming home remittances. This financial year, Pakistan will break through the historic US$ 15 Billion mark in inward remittances. On an average these remittances cost the system about 2% to 5% depending on the channel used, and method used and the amount remitted. There is an entire ecosystem that rides on this money and takes advantage of it. The banks, the MTOs and the distribution players involved. The government (specifically Pakistan Remittance Initiative) has done a superb job in the increase of remittances, yet we are at a stagnant point where we cannot make the remittance come in any faster nor anymore cheaper.
With Bitcoin, the domestic transactions can not only become more cheaper, (if not free), the same can be said of International (inward) remittance. Bitcoin enables its users to receive money in near real-time, at a fraction of the cost of the existing cost structures and does so with all the bells and whistles of security. The argument that Bitcoin is anonymous is not entirely true. Bitcoin is pseudo-anonymous. There is a general ledger that is open for all to see. The Wallet IDs can be associated with our CNICs and the transparency mechanisms required by State Bank of Pakistan can easily be met.
Implementing a Bitcoin system in Pakistan does in no way danger and/or reduce the market economics. For example, with inward remittances Pakistan will still continue to receive the US Dollars, even if we adopt Bitcoin as the primary system for sending remittances. It will make sending money from Chicago to a family in Mianwali a 15 minute process at best with all accounts settled and the transaction an irreversible one. We can have a unified payment platform, system and currency to do this. Again, at the risk of repeating myself, without disturbing any of the greater economic fundamentals associated with Remittances.
On the domestic, person-to-person payment, Bitcoin is a godsend. It can enable one to transfer money from person to person, regardless of the bank, wallet or mobile carrier they use. Right now of the existing micro-finance and branchless banks, none of them are settling with each other directly. For the myopic fear that it would dilute their expanding markets. Imagine if you want to send money from EasyPaisa to OmniWallet, you have to take at present the most expensive route that exists on our payment networks in Pakistan. It can be done for a few Paisas, but the micro finance and branchless banks refuse to consider it due to FUD (Fear, Uncertainty and Doubt) factor. Such obtuse thinking is leading us to the stagnation points I have mentioned above. We are where we are and will continue to remain here, because the institutions that have the power to change, don’t have the will to do so. Bitcoin can change that.
Add to this mix, the ability to receive inward payments from almost anyone else in the world. PayPal has not yet entered our market and is slated to do so (if they do at all) in 2016. Freelancers and Coders from Pakistan can take advantage of Bitcoin and have instantaneous settlement of funds into their account by merely adopting Bitcoins.
At present, there is only one merchant in Pakistan that I know of (hometownshoes.com) who are accepting Bitcoins! Kudos to them.
What Should We Do?
We should be having 10,000s of people who should have a Bitcoin wallet and be able to accept bitcoins. In Kenya, almost 1/3rd of the Kenyans now have a Bitcoin wallet. That is an enormous number from a country that is considered a developing economy. Its people, however, are visionaries! If Bitcoin is enabled on domestic markets, there represents a huge arena of opportunity for coders, developers, business developers, market makers, etc. to provide services wrapped around the Bitcoin protocol.
To build our case for Bitcoins, we need more and more people to start having a Bitcoin wallet. (it takes 5 minutes to sign up for it and is the same concept as getting a Hotmail or Gmail account).
Until you do not embrace Bitcoins and start playing with them, sending each other small amounts and experiencing it, you will never be able to understand it all. Jump into it. Experiment!
On the merchant side, we need more merchants to look into Bitcoins and start accepting it. On a communal level, we need to have 100s of communal sessions amongst the community where people, ordinary people can learn about Bitcoin so that they can get started with it. We need evangelists and proponents in every city and campus to further the cause of Bitcoins. Above, all, we need to start educating our policy makers about Bitcoins. Be it technocrats, politicians, etc. we need to have more time with them and tell them the positive benefits of what Bitcoin acceptance can do for the country.
Imagine the headlines, Pakistan authorizes and accepts Bitcoins. We would be in a league of a few but distinguished countries that have embraced a positive changed rather than being afraid of it. There is no doubt amongst many that Bitcoin is here to stay. People who try to compare it to the existing banking money (which is a 200-500+ year old model), are comparing wood to fruit. The analogy is incorrect. Its like being afraid of the Internet, the TCP/IP protocol and saying it will kill the postal industry. I, for one am glad we did embrace the Internet as we did and did not ostracize ourselves from the world’s network. I hope we are bold and sane enough to make the same decision with respect to Bitcoin.
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