Towards a world of cryptocurrencies
The volatility of bitcoin calls into question its ability to be used as a means of payment and thus its future. Financial regulators have the final say in determining the future of Facebook's virtual currency.
With its declaration of intent to create libra along with 27 other well-known companies, Facebook completely revolutionized the world of cryptocurrency. The markets turned their attention back to these types of assets, and regulators felt for the first time a pressing need to devote more attention to this world as they saw the possibility of the pound becoming a real currency parallel to those controlled by central banks. This is not a trivial matter, as the market turbulence caused by the 2008 lows marked by the yuan against the dollar in early August demonstrated, currencies are one of the main elements of power.
While the libra waits to receive its verdict, the cryptocurrencies continue to advance: New Zealand has announced that it will allow payroll to be made with them, China claims to be "close" to completing the development of its own virtual currency in order to render cash obsolete and the total capitalization of this market reaches 266,663 million dollars. All in all, Zuckerberg's project looks set to be titanic because of the huge user base of the different Facebook platforms around the world.
To find an example of how payment via social networks can work on this scale, look to China. With more than 1 billion people using the payment solution of the WeChat messaging application, WeChat Pay has become one of the most popular ways to make purchases in the shops of the Asian giant.
"There is a clear tendency to pay in places where people spend time, if we are a lot in social networks, it is normal that we can buy and pay within these networks," explains Íñigo Bañón Treviño, head of global payments at BBVA, an entity allied since last June with WeChat Pay.
The expert is confident that payment on social networks will continue to expand, either through the growth of WeChat Pay or through the arrival of elements of its technology to other social networks:
"Instagram has already announced that it will be possible to buy without leaving the platform and WhatsApp has already launched payments between people within the network", explains Bañón.
Since WeChat Pay doesn't use its own currency and the pound hasn't arrived yet, in the world of cryptocurrencies there is still one indisputable king: the bitcoin. So far this year, it has accumulated a revaluation of 182%, but as usual, its volatility has not been left behind.
"In the last three months, the volatility of the bitcoin is ten times higher than that registered by the S&P", points out Nereida González, consultant of the markets area of International Financial Analysts. "The bitcoin accumulates volatility of about 130%, when in the case of a weak currency such as, for example, the Turkish lira, is around 60%," said Ignacio De La Torre, chief economist at Arcano Partners.
It is precisely this intrinsic characteristic of theítcoin that is the main ballast for the future of cryptocurrencies in the opinion of experts. "The use as a means of payment is reduced, the high volatility of its price prevents it from serving as a reserve of value, which is one of the main characteristics of money," Gonzalez reflects. "Fewer payments are made in bitcoin than with the Swiss franc, its use is irrelevant and with a capacity to make only seven transactions per second, has no potential to replace the current means of payment," says De La Torre.
In the case of the libra, it expects to have a stable exchange rate against traditional currencies backed by a series of low-volatility assets such as deposits or short-term bonds, which would give it a better chance of becoming an authentic means of payment.
But in order for the libra to see the light, it must first successfully overcome the close scrutiny to which it has been subjected by the main monetary and stock exchange regulators around the world. The participation of Zuckerberg's company brings advantages to the libra but also inconveniences after the scandals related to the privacy of its users that have starred in the social network. For the time being, the European Commission would be analyzing whether the project could lead to anti-competitive practices precisely because of the treatment that the Libra companies could give to these data.
Facebook has already recognized to the SEC, that the launch of the currency could be delayed and even canceled by the pressure of the authorities and their inexperience in the world of cryptocurrencies. The economic authorities of the world's main economies, the G7, debated crypto coins at the beginning of the summer, and libra in particular, and concluded that "the conditions are not in place for the cryptocurrency to be launched" and that it must "respect the rules of the fight against money laundering and the fight against terrorism that are imposed".
"I think the libra may have the potential to launch with the U.S. go-ahead," estimates Clement Thibault, senior analyst at Investing.com, "but getting that go-ahead may require a series of changes so drastic that the libra that arrives is probably not the libra it was originally intended to be".
For his part, Pedro Servet, CEO of 25Delta EAF, is less optimistic about a hypothetical go-ahead: "I see it very difficult that the regulatory authorities and governments of the main countries allow the exorbitant growth of a currency or method of payment that they cannot control, so that their monetary policies would become obsolete and therefore, the management of the economies of Western countries," says the expert.
Along the same lines as Servetus, De La Torre expresses that the capacity to generate money has been one of the most essential elements in the history of humanity. "To expect states to accept a new method of payment is unreal, there is going to be enormous hostility on the part of regulators," he predicts. The future of the different cryptocurrencies is not yet clear, but experts agree that if the current ones do not survive, their technology can leave its mark for future successful initiatives.
MEXICO AND THE ADOPTION OF CRYPTOCURRENCIES
Mexico is the third country in Latin America with the most transactions in cryptocurrencies, only behind Brazil and Colombia. 35% of Mexicans who already have some type of virtual asset use it to make payments or purchases online. 49.6% of businesses that know about cryptocurrencies in Mexico would accept them as payment methods.
Technology advances by leaps and bounds: what is new today will remain in the past tomorrow. The governments of countries around the world are looking for new ways to make financial markets more stable and reliable for people, and within the last few years, they have decided to rely on blockchain technology, because of its degree of reliability and transparency.
Thinking about cryptocurrencies as an exercise that can be adapted to everyday life is consistent and practically a dream come true. However, in Mexico, according to a survey conducted by the UENI firm, it revealed that 67% of small businesses do not even know what cryptocurrency is.
According to the study "Cryptometer MX18: the first study of crypto money in Mexico", conducted in 2018 by Psyma Latina, Wisum, Bitso, and Fiinlab:
47.4% of Mexicans do not buy crypto-currencies for fear of being victims of fraud, 39.6% for ignorance about the establishment of the price of digital currencies, 30.5% because they consider that there is no support, 29.9% because they fear they will lose value in the market and 28% have more confidence in traditional financial methods.
Mexico is one of the most advanced countries in Latin America in terms of crypto-currency. It is the third with more transactions behind Brazil and Colombia. According to the study, 35% of Mexicans who already have some type of virtual asset, use it to make payments or purchases online, 32% decided to save them waiting for some time to increase its value and 15% prefer to use their digital money to make payments in establishments.
Cryptocurrencies as a method of payment
For now, according to Bitso, the platform based in Mexico City and a leader in buying and selling crypto coins, there are 92 establishments in Mexico where the use of crypto coins is not only a dream or a future project, it is already a fact. A person can buy products through Amazon, purchase flights through Expedia or books with Gandhi.
According to the survey conducted by UENI, 33% of the businessmen who claimed to know about cryptocurrencies, the sectors that most resonated in the question of their implementation are supermarkets, retail sector, restaurants and the sale of clothing and accessories. 75% of the first ones assured that they would not implement them to receive payments, while the other three sectors were more receptive.
The retail sector indicated, in 60%, that they could use them as a payment method; more than half of the business owners of restaurant chains would also accept the crypto coins, while 51.7% of the clothing and accessories stores would receive them.
A commitment to new technologies that are reliable and consistent, a plan for financial education and the learning of new methods should be undertaken. This will be the only way for society to demand that the government use blockchain technology in more sectors.
Societies around the world are changing and in order for Mexico not to remain in the past, it will be necessary to know how to implement new technologies, with blockchain at the head. Everything must start with financial awareness so that we can be open to what the future brings.