Cryptocurrencies Filling The Caribbean Banking Void
One of the largest crypto exchanges Bitfinex is heading to Puerto Rico. The Caribbean presents a unique advantage for cryptocurrencies, as a way to work around the biggest impediment to the space which is government regulation. How will the rise of cryptocurrencies impact Caribbean islands?
The Breakdown You Need to Know
The $375 billion cryptocurrency market could help to revitalize the Caribbean , a region plagued by slow economic growth and high levels of debt in recent years. Much of the Caribbean is underserved when it comes to banking services, which is why they are turning to cryptocurrencies in order to provide better financial services for their citizens.
British Virgin Islands based Bitfinex’s ability to transfer money had been shrouded in secrecy ever since Wells Fargo stopped processing its wire transfers early last year. Another setback Bitfinex experienced was back in August 2016, the exchange said it was hacked for a loss of $68 million. Now, Puerto Rico’s Noble Bank has taken up the mantle as custodian for Bitfinex, according to Bloomberg. However, Noble doesn’t actually hold the money. Instead, it uses Bank of New York Mellon Corp. as stated on its website.
CultureBanx reported Puerto Rico has seen a huge uptick of cash related to cryptocurrencies which are held by the islands International Financial Entities (IFE). These IFE’s which include Noble rocketed to $3.3 billion at the end of 2017 from $191 million a year earlier. Some of Bitfinex’s customer activity at Noble may be shielded under IFE rules because of its British Virgin Island registry. Bloomberg reported Noble is in the process of recruiting other exchanges to use its banking services.
While Puerto Rico is leading the cryptocurrency charge they are not alone. There are eight other Caribbean Island economies which make up the Eastern Caribbean Central Bank (ECCB) exploring digital currency opportunities. They have considered issuing their own cryptocurrency called the Digital Eastern Caribbean dollar (DXCD).
Caribbean economies are highly dependent on trade where the U.S. dollar still reigns supreme. Startups such as Barbados-based Bitt and Caribbean central banks have looked into the creation of digital currencies to help spur regional trade. Ryan Peterson, General Manager for Economic Policy at the Central Bank of Aruba has forecasted the introduction of a digital currency system would lead to 4-5% GDP growth for Aruba alone. This is significant, considering the region hasn’t seen more than 0.5% growth for over 20 years, according to Cayman Finance.
Digital Currency Mindfulness
The Caribbean is trying to assert leadership in the cryptocurrency space, an area that is still very much up for grabs. In countries where traditional finance is failing, cryptocurrency is stepping in as a legitimate alternative. Most traditional financial institutions that are bound by strict government regulations on money laundering and customer verification, don’t want to get involved with an industry that many still associate with criminal activity. There are some banks like Goldman Sachs dipping its toe into Bitcoin by opening up a desk for its clients to trade futures contracts on the digital currency.