Latin America “will be the global ‘hub’ of bitcoin”: Paraguay emulates El Salvador

The country is preparing to debate a legislative initiative to convert it into legal tender.

El Salvador’s decision to accept bitcoin as legal tender has generated a wave of interest in other Latin American countries that see cryptocurrencies as an opportunity to boost their economies and circumvent some of their inefficiencies. Panama, Mexico and especially Paraguay have taken steps towards a generalized adoption of the most operated of cryptocurrencies, with important legislation to provide a new legal framework, which makes analysts think that Latin America could become a world center of reference in cryptocurrencies .

El Salvador overtakes central banks and lights up a financial hub with bitcoin

The South American country is the one that is closest to following in the footsteps of the Nayib Bukele government, as Paraguayan Congressman Carlitos Rejala and Senator Fernando Silva Facetti plan to present a bitcoin bill in Congress on Wednesday, July 14, underlining the urgency of legislators to formulate a coherent digital asset strategy for their country. “I’m here to unite Paraguay,” Rejala tweeted last Friday, adding that he and his fellow legislator are planning a “mega surprise for Paraguay and the world.”

Without elaborating on what the new legislation will entail,

It is believed that, like El Salvador did in June, it will seek to have the creation of Satoshi Nakamoto considered legal tender in the country, which will imply the same advantages that the Central American nation theoretically enjoys. But, in addition, it is speculated that the future regulations will also introduce measures to turn the country into a world center for cryptocurrency investors, businesses based on these digital assets and, most likely, miners, given the low energy prices in Paraguay.

The technology entrepreneurs of the nation go to one when defending the suitability for the nation chaired by Mario Abdo Benítez to become a reference nucleus in blockchain and strategic technology in South America. This was defended last week, during the Talent Land Jalisco 2021 conference, by a group of businessmen from this industry, who closed ranks with the fact that the country has “all the conditions”. As they explained, the largest cryptocurrency in the world could be useful for sending and receiving remittances and for electronic commerce, still underdeveloped in the country, according to their vision.

In addition, the abundant and cheap energy production in this nation works as a magnet for cryptocurrency mining companies – dedicated to the process of obtaining these assets through computational power that consumes large amounts of electricity. Asian companies expelled from their countries by the strict regulations that hang over miners, especially China where these businesses have been banned, are landing in Paraguay where energy consumption is cheap thanks to the number of hydroelectric plants it has as it is the first country in the world in terms of energy availability per capita, as explained by the businessmen meeting in Jalisco last week.

For all the above, Latin American countries have all the numbers of being a global benchmark in ‘cryptos’ due to different factors. In the first place, according to Enrique Palacios Rojo, COO of Onyze, monetarily, “its financial systems are not as powerful as in Europe and the United States, and the banking system of its population is very low, which generates a great opportunity for the world of cryptocurrencies ”; secondly, “being one of the first countries in the world to draw up strict regulations for them allows them to position themselves as benchmarks.”

Finally, adds the expert, “thanks to the energy capacities in many of these countries of the South American and Central American continent, they serve as a claim for a sector such as mining that has been expelled from China due to the prohibitions of the great Asian giant” .

Startup in Cuba avoids the US blockade with bitcoins.

Money transfers from Cuban exiles are essential for many on the Caribbean island. But now the United States has stopped the flow of money. So new ideas are needed.

At the end of November, the US payment service provider Western Union processed, for the moment, the last money transfers between the United States and Cuba. Due to the new sanctions of the Trump administration against Cuba, the more than 400 branches of the company on the island had to close. A hard blow for Cubans residing in the United States who send remittances to their land of origin.

Until November, most of these transfers were handled through Western Union. So Cubans have to find new ways to support the sending of these vital foreign money transfers, one of the main sources of income for many families on the island.

The Cuban startup BitRemesas offers an alternative. Organize money transfers in the form of cryptocurrencies such as bitcoin, Ether, Doge, and others. “There is a growing community of supporters of crypto in Cuba,” says Erich García, a programmer and software developer from Havana.

This 34-year-old, who also manages his own YouTube channel with tips and solutions for using the Internet, launched the BitRemesas platform at the end of September.

Typically, to transfer money, customers go to Western Union or a bank, which charges them a commission and delivers the money to its destination. “The process is similar in our system, except that there is no bank involved,” explains García. “The money is sent to us digitally in the form of cryptocurrency and we take care of physically paying it to the client in Cuba.”

A win-win situation

The BitRemesas mechanism is very simple. García gives a practical example: “Someone from the US sends a relative through BitRemesas 100 dollars in bitcoins. We receive this 100 dollars in bitcoins and we organize an auction, let’s call it ‘negative’. There are many Cubans who want to buy cryptocurrencies . The smallest possible amount of bitcoins is auctioned. There are cases in which someone buys bitcoins for the equivalent of 88 or 92 or 93 US dollars. The difference in Bitcoin is, in this case, the profit of BitRemesas. “

The one who is willing to keep the least amount of bitcoins for the amount of Cuban convertible pesos (CUC) to which the remittance is equivalent wins. When the winner of the auction has transferred the total amount of the transfer, in this case 100 (CUC), to the recipient of the remittance, BitRemesas transfers the auctioned amount, in this case 88 or 92 or 93 dollars in bitcoins.

To understand all this, it is necessary to know that the CUC has depreciated strongly against the US dollar on the island, since the partial dollarization of Cuban retail trade. Although the official exchange rate remains 1: 1, on the black market they pay 1.50 CUC and more for one US dollar.

It is not possible to buy cryptocurrencies with CUC anywhere else. So people are satisfied with a smaller share. And, since 100 CUC is no longer 100 US dollars, but only around 66.67 dollars on the black market, they still do a good deal with the 88, 92 or 93 dollars in Bitcoin auctioned for 100 CUC.

BitRemesas currently has around 300 to 400 users. The trend is on the rise, says Garcia. In Cuba, there are an estimated 10,000 people in total who use cryptocurrencies. There are quite a few transfers, but often in small amounts of $ 10, 15, or 20, Garcia says. Since there are no fees, unlike Western Union or banks, people can also send small amounts: “Sometimes it’s $ 100, but the sums are rather small.”

Garcia’s platform collects a small margin on the respective cryptocurrency. And the person who buys the corresponding amount of cryptocurrencies receives a freely convertible alternative currency in exchange for the local CUC, internationally unusable. For García, “a win-win situation”.

Completely deregulated platform

“Cryptocurrencies give us certain freedoms that we normally do not have, since the use of financial instruments such as Visa, Mastercard, Paypal or other payment mechanisms is difficult for Cubans.” For García, this is the great advantage of cryptocurrencies in general and BitRemesas in particular. “It is a completely deregulated platform. There is no one who can block or sanction it, since cryptocurrency cannot be regulated and BitRemesas is based on cryptocurrencies.”

Not even the US Department of Justice has any legal recourse. The decades-long US blockade separates Cubans from financial markets and conventional international payment systems. Residents of the island do not receive credit or debit cards for international use. The United States sanctions against the Cuban financial institution Fincimex, which led to the closure of Western Union branches on the island, are just the latest in a long list of Washington measures against the Cuban financial sector.

“More and more Cubans use cryptocurrencies to buy or pay for services on the Internet,” says García. And he also has other ideas, such as paying the electricity bill, recharging the cell phone credit or similar, with the help of cryptocurrencies. “It is an alternative currency to which we have access in Cuba and which offers us new opportunities.”