While the success of cryptocurrencies has been much highlighted in developed countries in 2013, 2014 is certainly the year when digital currencies will embrace emerging markets.
One of the most important factors that indicate the growth of an industry is the amount of venture capital raised by its companies and startups. In 2013, Bitcoin startups raised a total amount of US$88m, which is 40.9% higher than 2012, as reported by CoinTelegraph.
Last year, among the 5 biggest VC investments in Bitcoin startups, only one was a non-American company. In November, Chinese Bitcoin exchange BTC China raised $5m in Series A investors funds from VCs Lightspeed China Partners and Lightspeed Venture Partners. Today, BTC China is one of the leading exchanges in the world in volume with more than 7,000 BTC traded everyday (approximately US$3.9m as of today's BitStamp exchange rate 557 USD/BTC).
As of June 5, US$113.2m has already been injected in Bitcoin businesses - that's already 29% greater than last year's total Bitcoin VCs' investments -, and it is little surprise to notice that the money has changed its path. While VCs had been attracted by American startups in 2013, they are now shifting their focus on emerging markets.
Countries in Asia have disparate economies, political backgrounds and strategies towards innovation. While Hong Kong and Singapore have decided not to hamper Bitcoin's growth on their territories, China and Vietnam have chosen a more defensive approach towards digital currencies. However, they have not forbidden digital currencies, but rather chosen to limit their use in fear of loosing power over their money creation monopoly.
Since the beginning of 2014, 8 among the 38 VCs investments publicly disclosed have been injected in Bitcoin companies based in China and South Asia. The two most attractive locations are without surprise, Singapore and Hong Kong, with funding round amounts of US$240,000 (Singapore-based financial services provider Tembusu) to US$1.5m (payment processor GoCoin).
However, a pleasantly surprised announcement was made on August 11, indicating that Barry Silbert's Bitcoin Opportunity Corp. closed a US$250,000 funding deal with Bangalore-based Bitcoin startup Unocoin. The Indian Bitcoin company was launched last December and handles trading, merchant processing and storage.
In an interview, Silbert said:
“I believe that Unocoin has the potential to become the leading Bitcoin company in India for buying, selling and storing Bitcoin, as well as merchant processing. As an early investor in BitPay and Coinbase, I saw first hand how first-mover advantage, coupled with a great team, can lead to market dominance.”
Unocoin's managing director Sathvik Vishwanath stated:
"A good part of the investment will be spent on scaling up Unocoin and its marketing efforts, while another part will be used towards regulatory compliance and security expenditures. [...]We believe our hard work is starting to pay off [...] I can say we are processing 10 times the user verifications per day than [...] just 2 months ago."
Unocoin also said to be looking at India's remittance market, a major opportunity for Bitcoin startups when considering the US$65.6bn injected in the country between 2012 and 2013.
Barry Silbert is the founder of SecondMarket, an American online marketplace for buying and selling illiquid assets. In September 2013, Silbert created the Bitcoin Investment Trust, "a private, open-ended trust that is invested exclusively in Bitcoin and derives its value solely from the price of Bitcoin," as stated in his LinkedIn profile. The VC vehicle, Bitcoin Opportunity Corp., have invested in 30 related-Bitcoin startups so far.
In late July, Silbert decided to resign from his position as CEO to focus on Bitcoin:
“I have chosen to move on from day-to-day management of the private company/fund business so that I can focus 100% of my energy on our digital currency business. My passion for Bitcoin is no secret and I feel it is the right time to make this transition.”
Silbert's funding in Indian Bitcoin startup Unocoin, isn't the first investment he had managed toward a Bitcoin company based in a developing country. In fact, 4 out of 9 investments that have been made by the Bitcoin Opportinity Corp. in 2014 were in favor of non-American companies.
In late July, Mexico-based Bitcoin exchange Volabit raised US$250,000 from Bitcoin Opportunity Corp. The company is said to be focusing on remittances services in Latin American. Silbert then told the press:
"Through the use of Bitcoin, Volabit has the potential to radically transform the US-Mexico remittance corridor, one of the largest money transfer corridors in the world."
Besides Volabit, investors have targeted several other Latin American startups.
On March 18, Mexican Bitcoin exchange meXBT raised US$340,000 from Seedcoin and private investors. Couple days later, Buenos Aires-based Bitcoin exchange Bitex.la was launched with a US$2m investment from a UK investment firm. So far, Bitex.la's funding is the largest Bitcoin VC investment in Latin America.
The latest VC investment in date was in favor of Argentinian electronic-payment company BitPagos, Inc. with a seed round of US$600,000 led by Pantera Capital, Tim Draper, Barry Silbert, and others. BitPagos' CEO Sebastian Serrano said he was hoping "hotels and hostels in the South-American country will bill their customers with his electronic-payment company BitPagos Inc. to bypass the country’s troubled currency and accept payments in bitcoins or dollars," reported the WSJ.
While there is still no Bitcoin VC investment publicly disclosed towards African startups, the continent has been the center of attention regarding the potential of digital currencies in the region.
Since the beginning of 2014, Bitcoin startups have been emerging in Africa, mostly in Kenya and South Africa.
On August 11, the first Bitcoin ATM in Africa was installed and running. The machine is located in Johannesburg:
The Bitcoin ATM is installed and running and has done 10 successful test transactions. Connected to exchange and live probably in 4 days!— 1st African BTC ATM (@ZABitcoinATM) August 11, 2014
African Bitcoin startups have been working on integrating the technology with local habits and needs. Every year, the African diaspora spends US$1.8bn in remittance fees, an opportunity for Bitcoin startup BitPesa, which offers money transfers over mobile phone.
The service allows people overseas to send bitcoins to Kenya, which are converted into Kenyan shillings and sent to the recipient. The company only takes a 3% commission fee, compared to the typical 10-20% from traditional remittance services such as Western Union or MoneyGram.
While Bitcoin businesses have been flourishing, Bitcoin mainstream acceptance is on its way too. According to a recent survey, 74% of respondents in Kenya would feel comfortable investing money in virtual currencies, which is more than any other country surveyed. This included Brazil, Mexico, India, Indonesia, Nigeria, the Philippines, South Africa, and Vietnam.
A video coverage was even made in Uganda where a finance student shared his ambitions regarding Bitcoin in his country:
While Bitcoin has long been criticized for being hyper volatile, experts note that it is actually more stable than some other exotic fiat currencies. And while Bitcoin is considered as a secured store of value or a cost-effective value exchange system, the digital currency is booming in various part of the world, in favor of either the "unbanked", or the ones thrilled by innovation.