Building the alliance between cash & crypto
For a Fintech startup, working to drive the adoption of crypto, our insistence on the importance of cash may seem peculiar. But we’ve been commenting on the War on Cash, derisking, and the plight of bankless communities for some years now. We continue to believe that cash is important as a carrier of value, and means of empowerment.
While we live in a digital age, most things around us are still very physical. Money is no exception; cash remains the most common means of payment, and its circulation globally is growing.
Just recently, an interesting whitepaper on the importance of cash was published by Cash Matters, and it’s worth looking into.
What’s special about cash?
For at least 60 years, as the report points out, there has been an expectation that cash would disappear, but so far cash has remained an important part of people’s everyday lives, and for good reason.
The physical nature of cash is such that no matter how many people use it at the same time, there is no ‘system overload’. It is a form of public money. As soon as it changes hands from issuer to user, control over it is likewise transferred completely. It cannot be confiscated with the click of a button or frozen from afar. Although there may be costs associated with the production of cash, a cash transfer in person is essentially free of charge.
In addition to being a public good, it also constitutes an infrastructure. It serves as a store of value, fosters stability, and it enables people to create private spaces where government oversight is limited.
Another lesson we can learn from the persistence of cash is that the payment space is - and should be - rich in options. Whether people want to pay via bank transfer, WeChat, on a peer-to-peer basis, using Bitcoin, or with paper money; the freedom to choose should be there.
Also, because cash is physical there are certain things you can do with it which cannot be done with electronic alternatives. For example, you can hide it under your mattress, fold it up, discreetly tip the doorman at the hotel when you shake his hand, find it on the street, and basically make payments that cannot be tracked.
Imagine that each and every single one of your expenditures was tracked, stored in a big database and analysed. Would you feel comfortable?
We live in a world where ‘data is the new oil’, and whole new industries have arisen to capture your behaviour, preferences, opinions, and experience, and selling this data as a commodity to businesses and governments. As a citizen, you should always have the option to ‘go dark’ so to speak. Especially if governments turn against you, or fail to provide adequate protection against intrusive corporations, you need to have guard rails in place that protect your autonomy.
Whereas digitised payment systems speak to efficiency and convenience, nothing speaks to privacy and freedom as much as cash and, of course, crypto.
Cash is king, Crypto is queen
In a previous post, we already discussed how cash plays an important role in emerging economies as they transition to more digitised financial systems. In a way, it’s no different as we move to adopt cryptocurrency.
One of the first things people wonder about as they consider investing in Bitcoin is how to purchase it and also how to sell it again for fiat. In some cases, it’s possible to cash in and out of crypto via bank transfer, but regulation of crypto keeps changing and banks have not been reliable partners in the development of this ecosystem.
Also, with around 2 billion people still unbanked, for them, access to cryptocurrency predominantly relies on the availability of physical cash on and off-ramps. Whether that means exchanging cash for crypto in person on a peer-to-peer basis or at a specialised shop doesn’t really matter.
With our work, we’ve built our entire business model around this. Over the years, we have built up a comprehensive ecosystem that enables our customers to exchange cash for crypto, trade against other cryptocurrencies, and transfer money across borders fast and cheap.
When you exchange cash in US dollars for cash in Philippine Peso in person with a friend, you can quickly find the exchange rate online and trade fairly, so no value is lost. In black markets, US dollars can come at a premium - cash offers that flexibility. But as soon as foreign currency exchange takes place via formal middlemen to facilitate a cross border transfer, it starts to get expensive. Crypto solves this problem as a perfect bridge between various local currencies.
Stablecoins are particularly vital to this. Pegged to the value of local currencies, they enable easy and cheap exchange and cross border money transfers.
Building the alliance between cash and crypto
It is our goal to list stablecoins pegged to each of the world’s 180+ local currencies, create on and off-ramps for each of them, and make it possible to trade these local stablecoins against other currencies and crypto-assets like Bitcoin.
This way, everyone can have access to this new asset class, diversify their portfolio, hedge against risk, easily make cross border payments, and basically start to participate in the global economy.
The beauty of this alliance between cash and crypto is that the benefits of cash around privacy, financial freedom and decentralisation are retained when converted to crypto, while at the same time payments are optimised in terms of efficiency and convenience.
As the world continues to digitise, strengthening this alliance will be important in providing an alternative to mainstream payment systems.