The coronavirus pandemic is transforming our attitudes toward money — but what does this mean for the crypto sector?
We spoke to Electroneum CEO Richard Ells about whether digital assets can offer a compelling alternative to cash, the challenges that the industry must overcome, and whether enough crypto projects are making the effort to comply with regulatory demands.
1. What would you say is crypto’s role in the current financial landscape?
Cryptocurrencies are disrupting the entire financial landscape and reshaping the industry. Crypto is a wake-up call for traditional banks, monetary systems and authorities because they cut out intermediaries and threaten their control over financial services. Cryptocurrencies make peer-to-peer transactions possible at higher speeds and at lower costs than ever before.
2. Isn’t crypto too volatile to become practical as an everyday means of payment?
Perhaps this is true in developed countries, where economies are generally more stable than in developing nations. But let’s take Venezuela as an example. Their fiat currency, the bolivar, is trapped in a downward spiral and has dramatically depreciated against the U.S. dollar.
People there prefer to use cryptocurrency instead of their local currency, and given the financial crisis, it makes perfect sense. Although digital assets are volatile, they do shield consumers from inflation and devaluation.
This is also true in Argentina, which suffered bank runs in 2001 and is currently threatened by another one. Growth in crypto use is more prevalent in countries with financial crises.
The crypto market will be more stable once regulations are implemented and the industry matures. Volatility is definitely an issue in the crypto space — except for stablecoins, of course.
3. Do you think the coronavirus pandemic will make more people turn to crypto?
Deutsche Bank recently released a study saying COVID-19 has sped up the evolution from touchable coins and banknotes to touchless systems, including cryptocurrencies. Cointelegraph recently published an article stating that the pandemic has pushed people to alternative payment methods so they can avoid using cash.
Last month, Singapore’s DBS Bank said large financial institutions in Europe are beginning to see renewed demand for crypto — and its chief economist Taimur Baig said global bankers believe COVID-19 will speed up adoption. Coinbase agrees.
Electroneum can back this up with its own numbers. In the four months between May and August, Electroneum saw nearly 7,000 new users in Brazil, over 16,000 in Turkey, 8,000 in Nigeria, and the same in India.
Over the same period, AnyTask’s user base more than doubled — from 245,613 on May 3 to 514,855 on Sep. 6.
4. With the way we all work shifting because of COVID-19, and more people going freelance, could crypto play a part in helping workers earn a fair wage?
Crypto and blockchain can help make salary payments more transparent, and therefore fairer. Provenance’s network is an example of this, as it’s used to prove that dozens of farmers are paid a living wage.
We live in an increasingly globalized world — where people in South America are dealing directly with customers in Africa, Europe, or Asia. Blockchain helps keep track of local wages to ensure workers get a fair salary.
Freelancing is quite different, as talented individuals decide what their work is worth and put a price on their offerings. They will raise or decrease the price based on demand.
From our end, as administrators of AnyTask, we are not charging freelancers any fees or commissions because we believe they should not have to pay up to a fifth of their income to websites that allow them to list their tasks. Instead, we have put a small fee on the buyers’ side. They too are fully protected, as we offer a full refund if they are not 100% satisfied with the work delivered to them.
5. What’s your view on crypto’s role in helping to foster financial inclusion?
Crypto is perfect for achieving financial inclusion. Electroneum is a good example — we have created a mobile cryptocurrency that does not require users to have a bank account, and our ecosystem is undergoing continuous expansion.
AnyTask is a key component of that ecosystem because it gives people from around the world access to the global digital economy. It unlocks the opportunity for them to earn crypto and then use it for various purposes, including mobile phone and electricity top-ups. In many places, they can also buy food and other products and services.
With the Electroneum app, people can send, receive and transfer value for a fraction of one US cent. We are instantly opening the door to financial inclusion for millions of people around the world and that is why our project has been so successful. We have over four million registered accounts, and about 5,000 more are signing up every week.
6. Are cryptocurrencies and blockchain too difficult to understand for everyday consumers?
Crypto and blockchain are still in their very early stages. With only 100 million worldwide currently using cryptocurrencies, according to researchers at the Cambridge Centre for Alternative Finance, we can safely assume there is still a significant lack of knowledge and education — not just among the public, but among authorities and institutions too.
One of our main objectives from our Blockchain for Europe membership is to promote crypto education for authorities — helping them understand the technology so they can regulate the space in an informed way.
A 2020 study by the Financial Conduct Authority revealed that 27% of people have never heard of cryptocurrency in the United Kingdom. Last year it was 58%, so awareness is increasing. However, many other researchers agree that only one in ten people worldwide understand crypto — and based on the Cambridge Centre survey, it’s estimated that just 1.2% of the global population actually own cryptocurrency.
7. Is there any evidence to suggest emerging economies are embracing crypto?
An in-depth report by Deutsche Bank revealed people in developing countries are more likely to embrace crypto than those in western Europe, where skepticism toward digital payments still runs high.
Developing countries have skipped various phases of technological advancements. Let’s take the Internet as an example. Fiber optic cables are yet to be fully installed in many major economies — but in developing countries, they are using high-speed Internet already. They have gone straight to 5G.
Back in August, Blockchain.com said there were only 52 million blockchain wallets worldwide. They also noted that Peru, India and Indonesia were among the countries with the highest increase in crypto wallet creation, with Nigeria topping the list.
8. Why would someone use crypto to buy top-ups for electricity meters and mobile phones instead of cash?
Convenience is the short answer. Topping up your phone or electricity meter via the Electroneum app saves you the time it takes to travel to a shop for the mobile top-up, and then to another shop for the electricity top-up. Consumers also save on the cost of transportation.
What’s equally important is that freelancers on AnyTask can earn airtime and data by offering their services — and by getting paid in ETN, they can buy top-ups from within the Electroneum app in about 140 countries. This also applies to electricity top-ups.
People working overseas can also use ETN to top-up the phones and electricity of their friends and families, instead of relying on costly money transfers. Topping up remotely and from the comfort and safety of a mobile app saves time and money. For people in Africa, that is a huge benefit as many migrate to developing countries to work and help their families back home.
We have plans to expand electricity top-ups to at least 10 more African countries in the coming weeks. We are also about to integrate online purchases of a wide variety of food items and construction materials to at least a dozen African nations. The long-term plan is to enable these purchases from within the app for people around the world. That means that migrant workers can order food and other items from within the app and have them delivered to the doorstep of their families’ house many miles away.
Those of us who live in developed nations take all the privileges we have for granted, such as physical bank branches, ATMs and banking apps, as well as credit and debit cards. Many of us don’t realize that, in developing countries, these services can be scarcer and geographically further apart. Many are oblivious to the daily challenges the poor and the unbanked face on a daily basis.
9. What do you think are the main hurdles in crypto going mainstream?
Delays in transaction times are a massive hurdle, but Electroneum has successfully addressed this with its instant payment system, through which we have seen hundreds of thousands of app-to-app transfers take place. Other key hurdles are regulations and increasing usability.
Cryptocurrencies need to evolve into a medium of exchange that is as easy to use as fiat currency and electronic payment methods. For mass adoption to happen, cryptocurrencies need to be widely accepted for payment of bills, taxes, transportation, rent, school fees, food, and many other products and services. They also need to be easier to use, as many find encrypted keys and crypto exchanges daunting.
Electroneum’s ETN is the only crypto with two decimal places. The reasoning behind this is that we want ETN to avoid being as confusing as other cryptocurrencies. For example, when you go to a coffee shop for a latte and pay with Bitcoin, you will pay around 0.00034 BTC ($3.90). When you pay the same amount with our cryptocurrency it comes to about 500 ETN, which is perfect for instant transactions with vendors.
With Electroneum, users — even those who are unbanked — can earn crypto without needing a bank account or having to register at a crypto exchange. They can store their ETN in their Electroneum mobile app, and from within the app they can send, transfer, and receive funds as well as pay for products and services. We are still building the ecosystem, and we are improving our app’s user interface and user experience.
Regulation helps build trust with users, who feel protected when authorities are overseeing crypto activities to ensure the public is not affected by unscrupulous actors in the financial sector.
10. Can crypto be fully compliant with demands from global regulators?
I would say very few cryptocurrency projects are making any effort to comply with regulations anywhere around the globe. Electroneum is one of a very small group that are ensuring they comply with any regulations, thus making them attractive as use cases for businesses. Cryptos falling outside regulation may find themselves with little adoption in the near future as regulatory positions change to ensure projects operate within a similar set of rules to the traditional financial services industry.
Most regulatory authorities avoid reinventing the wheel, so they take advantage of the research and consultation carried out by their counterparts in other countries. So, generally speaking, yes — cryptocurrencies can mostly comply with regulations from one country knowing they will likely be the same or very similar to other countries.
One of the key objectives of Blockchain for Europe, the prestigious lobbying group we have just joined, is achieving global crypto and blockchain regulations.
Financial watchdogs from around the world will eventually come together to agree on global regulations for cryptocurrency.
For example, Anti-Money Laundering and Know Your Customer regimes evolved on a global scale last year. The Financial Action Task Force, the US Financial Crimes Enforcement Network, the Financial Transactions and Reports Analysis Centre of Canada and the EU came together to take some rigid steps to make KYC and AML compliance a global phenomenon. The same will eventually happen with crypto, as it has with most other financial markets in the past.
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