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Bitcoins Catching On in Latin America

BTC symbol. Credit: Bitcoin.org

BTC symbol. Credit: Bitcoin.org

MEXICO CITY, Sep 9 2013 (IPS) - The Bitcoin, a virtual currency that circulates outside regular financial systems, is catching on in Latin America.

Mexican systems engineer Moisés Briseño is a user and student of this completely digital cash system that is independent of any central issuing authority.

“I buy and sell Bitcoins. I check the exchange rate quotations and trends. They are still not much used in the region. One of my aims is to encourage existing businesses to accept them and to show their advantages for users and businesses,” said Briseño.

The Bitcoin was invented in 2008 by Satoshi Nakamoto – thought to be the pseudonym of a Japanese programmer or group of people. The software to issue and exchange it among a network of users was published in January 2009.

It isn’t just a “fashionable” online currency, but something far more revolutionary, Fernando Ulrich of the Instituto Ludwig von Mises in the southern Brazilian city of Porto Alegre told IPS.

Ulrich is a Bitcoin enthusiast, saying that not only does it reduce transaction costs, but it also represents a new way of thinking about the international economy without interference from national states and central banks.

A café in Berlin

Marie, a young resident of the Kreuzberg district of Berlin, buys an espresso macchiato in Floor's café and pays for it in Bitcoins. She uses her cellphone to read the Bitcoin barcode on the till, marks the price and orders payment from her virtual wallet. At the present rate of exchange, the coffee costs around 0.03 Bitcoins.

Bitcoins can be used for payment at some 25 Berlin shops, which are identified with the barcode and the stylised B that is the universal symbol of the Bitcoin, displayed at the entrance. Most of them are bars and cafés, although some hotels and stationers also accept Bitcoins.

Marie pays for things in Bitcoins "two or three times a day. I don't know if it's the currency of the future, but I do think virtual money is going to be the in thing for online transactions. No doubt there will be a number of currencies available; that’s inevitable.”

In recognition of its growing, although still minimal use, in Berlin and other cities, the German government authorised the Bitcoin as a "unit of account" in August.

Like Marie, most users are young people who are used to using smartphones and the Internet for almost everything.

To them it is a symbol of personal freedom, especially vis-à-vis banks, which have been discredited by their role in the financial crisis that has affected the world since 2008.

“I was astonished at its revolutionary potential. It is a robust network and an innovation that can change the way people conduct transactions, by liberating people from dependence on the monopoly of money issued by the state,” Ulrich said.

Each Bitcoin is produced by computers that solve highly complex cryptographic problems.

The creation of Bitcoins is limited from the outset. About half the eventual total is already in circulation, but they will continue to be issued at an ever slowing rate until 2140. The absence of a central issuing authority has caused wild volatility in its value against the dollar or pound sterling, but the trend is for the Bitcoin to appreciate against these currencies.

It cannot be counterfeited because of the cryptographic system used. Transactions are peer-to-peer, and Bitcoins can be exchanged for dollars, euros or other currencies, or for goods and services.

Bitcoin users connect to the decentralised network of users, and two unique linked keys are generated, which are needed to exchange with any other client.

One key is private and remains hidden on the client’s computer; the other is public and allows transactions to occur.

The system includes a mechanism to verify and validate the transaction and a public ledger that records every operation, allowing the history of each and every Bitcoin to be traced.

Bitcoins began to be used in Brazil in 2012 and users there are still novices, and curious about exactly how the currency works.

Rodrigo Batista, president of the Brazilian company Mercado Bitcoin, says turnover is low but growing rapidly.

“Most users buy and sell the currency to make money on its value. It’s in the process of being adopted in Brazil, beginning with São Paulo,” the largest industrial city in the country, Batista told IPS.

There are between 4,000 and 5,000 people interested in Bitcoins in Argentina, of whom 400 are using the system, while others are studying it, Diego Gutiérrez, the president of the Argentine Bitcoin Foundation, told IPS.

The Foundation offers advice and information and organises two explanatory meetings a month in its Buenos Aires headquarters.

“Paper money is on the way out and the Bitcoin has big technological advantages, such as making transactions more secure,” Gutiérrez said.

LocalBitcoins is a portal that puts users in touch with a marketplace of local Bitcoin exchangers in their city or country.

According to the website Bitcoinwatch, there are 11.65 million Bitcoins in circulation with a total value of 1.46 billion dollars, and they are changing hands at an average rate of 2,128 transactions per hour.

Countries like Germany, Australia, Canada, Finland and France permit their use, while Thailand has forbidden them.

The United States ordered an investigation into Bitcoins this year, arguing that they could be used for financing terrorism or money laundering.

Companies in Argentina are still not enthusiastic because there is no regulatory framework, Gutiérrez said. But it is “the perfect currency for electronic trading,” he maintained.

“I see no sign of any regulations,” said Briseño, in Mexico.

Batista, however, said Bitcoin trading is subject to the laws that govern commerce in Brazil, and he believes that “some type of specific regulation is on the way.”

In Ulrich’s view, the Bitcoin could help solve the international financial crisis.

Its risks are due to the fact that it is a recent experiment, and the outcome is difficult to predict in the long term. “It may be that some currencies will circumvent Bitcoins with more advanced technology,” he said. Some digital currencies have already appeared with simpler computer programmes.

Critics fear it may be used “for all sorts of crimes,” as lawyer Thomas Schulte, an expert on the Internet, told IPS.

“The Bitcoin can be used to commit all the crimes that are possible with real money, but anonymously and in an unclear regulatory framework,” he said.

With additional reporting from Marcela Valente in Buenos Aires, Fabíola Ortiz in Rio de Janeiro and Julio Godoy in Berlin.

 
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  • C.Raghavan

    The recent disclosures of NSA spying activities in O’Globo and elsewhere suggest that (a ) the US has created in all currently available software and IS providers, loopholes and backdoors against random selection security codes for internet, and for all online credit card and other transactions. These do raise questions on how secure even the bitcoin software’s cryptographic random selection codes are?

  • Jackus Blackus

    Litecoin is popular in Mexico

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