Global Payment Landscapes and Crypto Adoption: Paving the Way for Financial Liberation in Emerging Economies#
Abstract#
Crypto presents two different faces in different regions: it is a speculative asset in developed areas, while acts as Prometheus, bringing a financial lifelines in emerging regions.
When a country's economy faces collapse, cryptocurrencies such as Bitcoin and stablecoins tend to gain popularity among the public, as seen in Ukraine, Turkey, and Argentina. In the past decade, the Turkish Lira, Argentine Peso, and South African Rand have been among the top three weakest currencies globally.
In regions where fiat currencies are weak, there are foreign exchange controls, and the liquidity of mainstream currencies like the US Dollar and Euro is limited, crypto finds fertile ground as tools for residents to store value and achieve financial liberation.
Figure: Crypto Adoption Rate in 2023, with Nigeria, Vietnam, Turkey, and Argentina ranking 2nd, 3rd, 12th, and 15th respectively.
Source: Chainalysis
1. Turkey - 52% of Turkish adults invest in Crypto, financial liberation, relaxed regulations#
Overview#
With an inflation rate as high as 80%, no foreign exchange controls, the liberation to buy and sell USD and Euro with Lira, and a highly developed and easily accessible banking system with low KYC requirements, these are the financial conditions and regulatory situation in Turkey.
Low barriers to crypto investment: Local licensed exchanges in Turkey (BinanceTR & CoinTR) allow direct deposits and withdrawals to and from bank accounts, even allowing cash transactions (USD/Lira/Euro) at offline stores. There are many fiat-to-crypto stores in busy areas, with real-time prices flashing like bullet screens. These cash transaction stores are all legally operated and require tax payments to the government. However, crypto payments are illegal since merchants report their income for tax purposes, and income tax is a core source of revenue.
No foreign exchange control: Individuals have no restrictions on currency exchange, while corporates have an upper limit of 800,000 USD. Currency exchange stores are everywhere and do not require KYC, making it easy for Turkish people to hold USD and Euro as savings.
Figure: Trading volume of USDT/TL far surpasses other Emerging Market currencies.
The Turkish Lira to USD exchange rate collapsed in 2021, with the trading volume of USDT/TL even surpassing that of USDT/USD.
Figure: The collapse of the Lira to USD exchange rate in November 2021.
The daily trading volume of crypto is close to half of Turkey's daily foreign exchange trading volume.
Cross-border remittances: Local PayPal became unavailable in 2016 due to the inability to meet local regulations, so people generally use services like Wise or Western Union.
Cards as mainstream payment: Debit and credit cards are widely used in Turkey. According to the Banking Regulation and Supervision Agency (BKM) data, the total number of credit and debit cards in Turkey in 2021 was 291 million, including 150 million debit cards and 83.8 million credit cards. Turkey is a leader in the total number of cards in Europe. The total transaction amount paid with credit and debit cards in 2021 reached 1.71 trillion lira.
Turkey has a well-developed banking sector, far superior to Europe. With over 50 commercial banks, most of them offer a payment experience comparable to Alipay.
Open-minded Fintech Regulations:
Despite having a developed banking system, Turkey still has a high percentage (26%) of the population without bank accounts. A payment product called Papara exists outside the banking system and has 17 million users. It only requires a local Turkish phone number and email, with no need for ID verification (KYC). It offers free transfers and issues physical cards in collaboration with Mastercard. While being regulated by the Central Bank of Turkey, it combines a certain degree of financial liberation and the convenience of card payments inherent to decentralized wallets.
Case Study: Papara, a payment product beyond the banking system#
Image: Papara exists outside the banking system, providing a card-like experience with Papara Card.
Image: Various features of the Papara product, including sending and receiving currencies, paying bills, and subscribing.
Source: Papara
High level of digitalization of population info & digitalization of government affairs: Residents can handle all government affairs, pay fines, file taxes, apply for passports, and obtain student certificates from home.
Image: Turkish public government platform.
Source: Turkiye.gov.tr
Cash in & Cash out Smoothly: Licensed exchanges in Turkey, such as Binance TR and Coin TR, allow direct deposits and withdrawals to various bank accounts, with a fee of only 3 TL.
Crypto Adoption#
As of October 2022, there are approximately 8 million actively investing in cryptocurrencies. If we include immediate family members, the number is estimated to be around 14 million.
Source: KuCoin
Turkish Crypto Exchanges:
- Licensed exchanges in Turkey that support bank card deposits and withdrawals:
- BinanceTR
- CoinTR
Popular local exchanges in Turkey: Local exchanges such as Paribu and Btctürk each have over 6 million registered users.
- Btcturk
- Paribu
- Bilira
Image: BtcTurk logo seen everywhere at Istanbul Airport.
Source: Author's photo
CoinTR is worth mentioning, a state-owned enterprise in the exchange industry. CoinTR has partnered with two national banks in Turkey, Ziraat Bank and Vakif Bank, to establish fiat deposit and withdrawal channels. It is more like a company jointly established by regulatory agencies, traditional banking institutions, and international technical teams, aiming to solve the currency exchange and USD reserve issues faced by Turkey.
2. Argentina - 25% of Argentine adults frequently trade Crypto and use it for daily payment#
Overview#
Latin American people need solutions for inflation, remittances, value preservation, and savings, making them enthusiastic supporters of crypto. In Argentina, it has become mainstream, with approximately 5 million people (out of a total population of 45.8 million) using it.
Image: Crypto trading volume surges when the Argentine Peso faces inflation.
Source: Chainalysis
Inflation: In October 2023, Argentina's inflation rate soared to 121%, which has been ongoing for many years.
Foreign Exchange Controls: The Central Bank of Argentina has implemented foreign exchange controls due to a shortage of foreign currency. This is to prevent capital flight. The central bank requires exporters to repatriate profits from overseas sales within 5 days. Institutions and banks need authorization to purchase US dollars in the foreign exchange market. Argentine citizens are limited to a monthly purchase limit of $10,000 USD.
The desire for US dollars and the imposition of foreign exchange controls have led to the emergence of the black market. In 2023, the desire for US dollars in Argentina caused the black market exchange rate to soar nearly 600 times. When unable to access US dollars, people turn to alternatives such as cryptocurrencies. This financial environment has created a demand among Argentinians for investment, protection against inflation, and financial liberation, with approximately 25% of adults in Argentina holding cryptocurrencies.
Crypto Adoption: According to data from Americas Market Intelligence, cryptocurrency adoption in Argentina is growing rapidly. At the end of 2021, only 12% of Argentine smartphone users purchased cryptocurrencies. By April 2022, this number had grown to 51%. Additionally, 27% of Argentine consumers claim to regularly purchase cryptocurrencies.
Local Exchanges in Argentina:
- Binance
- Bybit
- eToro
- OKX
- Gate.io
Image: Binance advertisement - Argentine businessmen contributing to financial liberation in Latin America through Binance P2P.
Economic Structure and Geographic Factors#
Approximately 50% of Argentina's economy is part of the gig economy, resulting in a high demand for cross-border payments. With a similar time zone to North America and a high level of education in Latin America, Argentinians have favorable conditions to provide research and development services to North American companies.
Cryptocurrency in the Daily Lives of Argentinians#
According to AMI's statistics, 71% of Argentinians hold cryptocurrencies for investment purposes, 67% as a hedge against inflation, and 46% to achieve financial liberation.
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Daily Life: 25% of Argentinians frequently use cryptocurrencies for daily expenses and storing value. Even ordinary housewives are proficient in using cryptocurrencies for everyday shopping and payments at clinics.
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AMI's data shows that Argentina is an important market for crypto debit and credit cards. For example, Mastercard and Binance Crypto Exchange have jointly launched prepaid crypto debit cards nationwide. Mastercard's statistics show that at least 51% of Latin Americans use cryptocurrencies for shopping. Furthermore, between 2021 and 2022, the total inflow of cryptocurrencies in Latin America exceeded $562 billion, a 40% increase from 2020.
Image: Over the past year and a half, the number of debit cards issued by local exchanges such as Lemon, Buenbit, and Belo has grown rapidly.
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Store of Value: According to AMI's survey data, over 50% of Argentinians purchase cryptocurrencies as a hedge against inflation, similar to assets like gold.
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Remittances: The World Bank data shows that Argentina receives approximately $650 million in remittances each year. Chainalysis has found that an increasing number of Latin American immigrants use Bitcoin for remittances to their home countries. With access to the Bitcoin Lightning Network through applications like Strike, more Argentine immigrants are enjoying the benefits of cryptocurrency cross-border transactions.
Case Study: Belo - Crypto Payment App for Financial liberation in Argentina#
Belo is a local payment app in Argentina that integrates web2 and web3 technologies, combining banking systems, fintech, and crypto payments. It enables cross-border payments without the need for verification, allowing for fast and secure fund transfers. Users can spend cryptocurrencies (BTC, ETH, USDT) and make payments in fiat currency (Argentine pesos) using a debit card, providing a similar experience to traditional debit cards.
However, opening a Belo account requires an Argentine ID or passport.
Image: Belo - A tool for storing value and achieving financial liberation for Argentine residents.
Source: belo.app
Payment Features:#
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Card Payments: Spend cryptocurrencies and recipient receives fiat currency. C-end users can spend any cryptocurrency (BTC, ETH, USDT) and make payments in fiat currency (Argentine pesos) using a debit card, providing a similar experience to traditional debit cards. Users also receive a 2% cashback on each transaction.
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Various Localized Payment Features for Daily Expenses, such as mobile top-ups, utility payments, insurance payments, basic service payments, shopping services, dining services, and telecom services (supporting 4 telecom operators). Users can also create an unlimited number of virtual cards, similar to Wise, with daily spending limits for various subscription services.
Receiving/Adding Funds:#
- Transfer from Payoneer Balance
Transfer funds from Payoneer (an online payment company in Latin America) to Belo without any delay. Funds are automatically converted to USDC at the current exchange rate for storage, conversion to other cryptocurrencies, or use with Belo Mastercard. A commission of 4% is charged for depositing funds, with a minimum amount of $5 USD. Withdrawals can be made up to 5 times per day, with a maximum amount of $5,000 USD. - Receive Euro Remittances
Belo supports SEPA transfers for receiving Euro payments. In the future, it will also support SWIFT and ACH transfers for receiving USD payments.
Foreign payments incur a commission of 1.5% and take 1 to 4 business days to be credited. The balance is automatically converted to USDC at the current exchange rate, and can be exchanged for other cryptocurrencies. By creating an account with an Argentine DNI, users can also use it with the Belo Mastercard. - Deposit Crypto Directly
Image: Belo supports SEPA transfers, transfers from Payoneer balance, and direct coin deposits.
Source: https://help.belo.app/es/articles/5705712-ingresar-fondos-desde-el-exterior-a-tu-cuenta-de-belo
Key Success Factors: Belo's product is developed by Argentine founders, and the local team has several advantages:#
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Deep insights into user needs, with a focus on fine-tuning the product. Just as PG said, even when something appears smooth, magnifying it ten thousand times will reveal gaps that can be optimized. For example, automatically converting peso balances to stablecoins and allowing users to choose conversion periods (daily, weekly, monthly).
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Integration of web2 and web3 account systems: Allowing transfers between various local accounts such as banks, fintech (Payoneer), and cryptocurrencies, seamlessly connecting fiat and crypto transactions. This requires strong local relationships and resource integration.
3. Africa - High Regional Disparity, Fragmented Markets, Unclear Crypto Regulations, Limited Infrastructure#
Overview#
Africa's situation is complex, with significant regional differences across its 54 sovereign countries and a population exceeding 900 million. Geographically, Africa is divided into five regions: North, East, West, Central, and South Africa.
Mainstream Payment and Account Systems in Africa:
Mobile money is a key driver of inclusive finance in sub-Saharan Africa. It promotes account penetration through mobile payments, savings, and lending.
Account penetration of mobile money. Mobile money account holders are not just using their accounts for peer-to-peer payments as originally designed. In 2021, about three-quarters of mobile account owners in sub-Saharan Africa made or received at least one non-personal-to-personal payment using their mobile money accounts.
Mobile money accounts have also become an important savings tool in sub-Saharan Africa, with 15% of adults in the region (and 39% of mobile money account holders) using their mobile money accounts for savings, the same proportion as those using formal accounts at banks or other institutions.
Mobile money as infrastructure for financial institutions. 7% of adults in sub-Saharan Africa also use mobile money accounts for borrowing.
Image: The World Bank's 2021 Global Findex Database found that 55% of adults in sub-Saharan Africa have accounts, with 33% adults having mobile money accounts.
Source: The Global Findex Database 2021
Mobile Money Technology: USSD#
USSD has very low infrastructure requirements, making mobile money a powerful payment method in Africa. USSD technology allows users to create mobile wallets using their phone numbers, store funds electronically, and directly transfer funds, pay bills, recharge mobile airtime, and make payments to merchants on their phones. It is accessible and usable worldwide without the need for internet connectivity, making it suitable for all types of consumers.
Image: USSD technology allows users to create mobile wallets using their phone numbers and store funds electronically, as well as directly transfer funds, pay bills, recharge mobile airtime, and make payments to merchants on their phones.
Source: Photo taken by the author
Image: USSD user flow
Source: https://www.digitalvirgo.com/mobile-payment/ussd/#down
Nigeria - Another Solution for Inclusive Financial Services with 25% of Nigerians Holding Crypto#
With a weak currency, a large disparity between the black market exchange rate and the official rate, and a high percentage of the population (55%) without access to banking services, there is a significant demand for crypto in Nigeria.
Figure: 55% of the Nigerian population without access to banking services
Source: The Global Findex Database 2021
Crypto adoption in Nigeria has been on the rise, with a 9% increase in cryptocurrency usage.
Source: Chainalysis
Strict Regulatory Environment: with most regions banning crypto payments. Binance C2C is the most commonly used channel for depositing and withdrawing funds.
4. Switzerland - Zug, as the Experimentation Ground for Crypto Valley#
Switzerland is known as the Crypto Valley, mainly due to its historical background and the registration of the Ethereum Foundation in Switzerland. Zug is also a pilot city for crypto payments. However, in affluent low-tax areas like Zug, crypto payments are not necessary as a supplement to financial infrastructure. The establishment of crypto payment special zones is more of an experimental nature.
Furthermore, in the 2021 Democracy Index published by The Economist, Switzerland ranks 9th, making it a suitable region for DAO practices.
Conclusion: Crypto's Dichotomy - Speculative Target in Developed Regions vs Financial Enabler in Emerging Regions#
In regions with weak currencies and limited access to mainstream currencies like the US dollar and euro (due to foreign exchange controls and inadequate liquidity), crypto finds fertile ground, providing local residents with tools for storing value and achieving financial liberation.
Among the four countries and regions mentioned above, Argentina has the most favorable soil for crypto payments.
- Turkey has a developed banking system and a relatively high level of financial liberation, but with a looming ban on crypto payments, it is not suitable for crypto payment development.
- Vietnam has a thriving crypto ecosystem, but there is a higher prevalence of speculative motivations among crypto holders.
- Africa lacks financial infrastructure, making it difficult to open bank accounts. With a weak currency, there is a strong demand for stable currencies and cross-border remittances. However, the lack of infrastructure and regulations have hindered many crypto wallet projects.
- In affluent low-tax areas like Zug, Switzerland, crypto payments are not necessary as a supplement to financial infrastructure. The establishment of crypto payment special zones is more of an experimental nature.
Additionally, crypto and financial technology products like Papara and mobile money can help users obtain financial accounts without barriers.
According to World Bank data in 2021, 1.4 billion adults without bank accounts cited lack of money, distance to the nearest financial institution, and insufficient identification documents as the main reasons for not having accounts. This can be addressed through technological solutions and financial regulatory policies, drawing on the technical experience of mobile money popularization in Africa. Alternatively, it can be achieved by directly using permissionless crypto accounts to increase the account penetration rate among the population.
Figure: Percentage of the population without bank accounts in different countries in 2021.
Source: The Global Findex Database 2021
As two friends from Africa and Argentina have said,
"Living in China, the US, Japan, and Korea, you don't really need Crypto. They hold crypto to speculate.
People in Africa and Argentina need Crypto to live."
"People don't care about self-custodial
People care about how to transfer money across borders easily."
Crypto presents two different faces in different regions. It is a speculative target in developed regions and a financial enabler in emerging regions. For residents in areas such as China, the US, Japan, and Korea, Crypto is not essential and is mostly used for speculation and narratives. However, residents in Africa and Argentina genuinely need Crypto to improve their daily lives, which is unrelated to speculation.
Reference#
State of the Industry Report on Mobile Money 2023 https://www.gsma.com/mobilefordevelopment/resources/state-of-the-industry-report-on-mobile-money-2023-2/
The Global Findex Database 2021 https://www.worldbank.org/en/publication/globalfindex/interactive-executive-summary-visualization
INFOGRAPHIC: 2022 CRYPTO LANDSCAPE IN ARGENTINA https://americasmi.com/insights/crypto-landscape-argentina/
The 2023 Global Crypto Adoption Index https://www.chainalysis.com/blog/2023-global-crypto-adoption-index/
Man of Crypto: Vietnam - 16M Crypto users, Growing Economy, Young Population https://mirror.xyz/manofcrypto.eth/5w7JpuzW-M4FMl-Na9zUADq3LMApvg-G1r4Ddduka5k