Cryptocurrencies are known to have helped traders generate wealth in the West. However, in Southeast Asia, they are currently used to help businesses assist people with everyday problems.
A great example is DApact. South China Morning Post reported that the microloan provider, which is based in Phnom Penh, Cambodia, leverages the traceability of digital currencies to issue small loans with low-interest rates.
Since every digital token has a unique DApact code, the tokens are recorded and traced in the system. The company, therefore, does not require any manual checking anymore.
The elimination of manual checks helps businesses reduce a third of the cost of traditional companies. The savings, then, result in lower interest rates for borrowers, who are often poor villagers in the country.
The loan provider is also very popular among international aid agencies. DApact co-founder Pierre-Marie Riviere said:
“For those lenders, transparency is very important. What we offer them is total control of every step of the [money lending] process.”
DApact has two pilot projects in Phnom Penh and is, now, testing the concept in pawnshops. The pawnshop acts as a physical currency exchange intermediate. Its responsibility is to take digital tokens and exchange them for fiat currency and collect repayments.
It may be a bit of a surprise that the Cambodian villagers are highly engaged with the digital ecosystem despite their low economic status. However, the situation is fairly common in Southeast Asia.
According to a KPMG report, seven out of 10 people in the region do not have a bank account in 2016. However, Southeast Asians spent a considerably longer amount of time on technological devices, such as mobile phones, than people in the United States or Europe, as recorded in a 2017 report by Google and Temasek.
Having a sound understanding of technological devices is a great start to digital currencies. People will, naturally, jump onto new opportunities if the benefits provide enough incentive to overcome the existing problems.
South China Morning Post added that DApact, or even Manila-based Bitcoin remittance service Coins, see a lot of opportunities for cryptocurrency-related business to grow in the region.
Other companies, such as CryptoAsia — a fintech startup located in Cambodia that helps companies to take in cryptocurrency payments — are also receiving real-world validation for their services. Despite being relatively new, they have over nine companies signing up for their services.
Others, however, expressed serious concerns related to introducing villagers to the cryptocurrency industry. Some believe that it is too risky and question if exposing vulnerable groups to volatile digital currencies is the best approach. Villagers with limited financial understanding may also fall prey to fraudsters, cybercriminals, and scammers.
Despite these concerns, the overall outlook for cryptocurrencies in South East Asia remains positive. Cambodian entrepreneur Rithy Thul stated:
“Digital currency is not perfect, but it is the most perfect money poor villagers have ever had.”
Cambodian Government Remains Undecided on Cryptocurrency Regulation
While the practical use of cryptocurrencies grows in countries like Cambodia, the Cambodian Government has not provided clear regulations concerning cryptocurrencies. Although they have not banned digital currencies, they have also not expressed support for the industry.
Thul told the Phnom Penh Post:
“I think it is a good sign that the [NBC] (National Bank of Cambodia is trying to use blockchain technology because it will be more likely to endorse future blockchain projects. But the use of cryptocurrencies is still in a grey area.”