Cryptocurrencies are taking the developing world by storm, with more users now in Nigeria than in the US – 2 experts lay out how bitcoin is changing emerging-market finance

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  • Insider spoke to James Butterfill from CoinShares and Marius Reitz from Luno in Africa about bitcoin in the developing world.
  • El Salvador recently made bitcoin legal tender and other governments may follow suit.
  • Cryptocurrencies can bring finance to the “unbanked” and help counter volatile domestic currencies, the two experts said.
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Cryptocurrencies have made it into the mainstream this year, with crypto-backed bank cards, investment products and traders, both big and small, have got in on the action, driving the likes of bitcoin, ether and dogecoin to record highs.

In the developing world, crypto adoption is growing at breakneck speed. Young, fast-growing populations that lack access to traditional finance, but have smartphones, from Brazil to Botswana, are driving the surge in the use of cryptocurrencies.

James Butterfill, who is an investment strategist at CoinShares, the largest crypto exchange traded product provider in Europe, and Marius Reitz, the general manager in Africa of crypto exchange Luno discussed the social benefits of bitcoin for the developing world.

“In third-world countries, we are seeing the take-up of bitcoin. If you look at bitcoin volume growth, it’s massive,” Butterfill told Insider.

For example, according to a Statista survey of global consumers in February, nearly one in three of those polled in Nigeria said they owned, or used, cryptocurrencies, versus just 6 out of every 100 in the United States, in 2020.

El Salvador’s recent decision to make bitcoin legal tender is an example of how developing countries are using crypto. The World Bank recently said it would not work with the country on its cryptocurrency plans because of how volatile it believes these assets are.

The amount of bitcoin that changes hands in emerging economies is exploding. Trading volumes in Brazil have risen 2,247% year-on-year in 2021, while in Venezuela, where political turmoil has created hyperinflation and economic crisis, crypto trading volumes have risen 833% in the last 12 months, according to data provider Kaiko.

In Nigeria, Africa’s largest economy, trading volumes have risen 128% year on year, and in Turkey, where inflation and economic decline have hit the lira, they’re up 143%, based on Kaiko’s data.

Bitcoin has been trading between $40,000 and $31,900 over the last month, but has moved between lows of $30,000 and to highs of as much as $63,500 over the course of 2021. Despite its volatility, consumers in developing countries love it.

There are about 1.7 billion people that are considered “unbanked”. However, around 48% of the global population has a smartphone and that percentage, in theory, have access to the internet, and therefore, cryptocurrencies, Butterfill said.

In Latin America, only 30% of the population over the age of 15 have a bank account, according to 2019 data by consultant Mckinsey.

“I think that really is a positive thing that bitcoin’s helping the unbanked be bankable,” Butterfill said.

A closer look at Africa

Crypto use has also grown in Ghana, Kenya, South Africa, Botswana and Zimbabwe.

“One region that may go unnoticed in the development and usage of cryptocurrencies, is Africa. The continent is one of, if not the most promising, regions for the adoption of cryptocurrencies due to its unique combination of economic and demographic trends,” Luno’s Reitz said.

One of the key factors that is encouraging people in Africa to use cryptocurrency is the cost of transferring money. The World Bank reported in 2020 that sending money to Africa via traditional bank transfer cost an average fee of 8.9% compared to the global average of 6.8%.

Sending money abroad, or even receiving funds from overseas, is littered with additional costs, including exchange rates and this is where crypto is helping fill that gap.

“It’s either really expensive, or really difficult to do. So, with something like bitcoin, you can have an international bank account and it costs you virtually nothing, that’s what’s really powerful about it,” CoinShares’ Butterfill said.

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Zelle is a safe way to send and receive money, but beware of scammers

pregnant woman making online payment with phone and credit card
When you’re sending money to a trusted recipient, Zelle is a safe option.

  • Zelle is safe, as long as you know and trust the person you’re sending money to.
  • Once you authorize a payment, it’ll go through, and there’s no form of fraud protection.
  • Zelle runs through your personal bank’s digital infrastructure, so it’s as secure as your bank.
  • Visit Insider’s Tech Reference library for more stories.

There’s no shortage of peer-to-peer digital payment apps; in 2017, Zelle joined the ranks of services like PayPal and Venmo as a simple way to send and receive money via your mobile device. Unlike the alternatives, though, Zelle is backed by hundreds of banks and directly transfers money between accounts in minutes.

That speed – and its status as the “official” digital payment system built into many banking apps – makes it a target for criminal activity, which has led some experts to question the app’s overall safety.

Zelle is safe if you know who you’re sending money to

Zelle was built by banks and was engineered to be safe. “Zelle is safe because it uses data encryption which offers users increased protection. From a privacy perspective, it’s safer than alternatives, like Venmo and Cash App, since it’s harder for scammers to access users’ personal information,” said Nishank Khanna, chief marketing officer at Clarify Capital.

But some well-publicized incidents of fraud are a cause for concern, and Zelle’s consumer protection isn’t especially robust if things go wrong.

The biggest drawback of Zelle is that it doesn’t offer fraud protection for authorized payments. In other words, if you purchase something online and use Zelle to pay for it, you have no recourse if you never receive the item you paid for.

For example, if you use Zelle to purchase an item from Craigslist, and it turns out you were scammed, Zelle won’t refund you. Thus, Zelle advises that you only use the service to pay people you absolutely know and trust.

Zelle app
To send money on Zelle, you need to enter the recipient’s phone number or email – but make sure you trust them.

Ted Rossman, a senior industry analyst at CreditCards.com said, “The key with Zelle is to only send money to people you know and trust. Once the money is sent, it’s gone. There’s no pending status, no chargeback mechanism, no buyer protections of any sort. If you send money to the wrong person, you’re basically at the mercy of that stranger to send it back.”

In fact, some criminals try to capitalize on that. “Some scammers deliberately encourage you to pay them via Zelle with the intent of stealing your money. If someone you don’t know is requesting a payment via Zelle, I’d suggest declining,” Rossman said.

But you’re not entirely without protection. In many cases, it all comes down to whether you authorized the transaction; if you did, you’re not protected. But unauthorized transactions are usually fully reimbursable.

“Zelle’s ease-of-use can also make it possible for malicious parties and fraudsters to use social engineering to acquire Zelle credentials,” said Tom Kelly, president and CEO of consumer privacy company IDX. Social engineering is when a scammer lies about their identity or goal to trick victims into giving them personal information.

Criminals have used social engineering to contact victims and request the two-factor code that Zelle requires to set up accounts. In situations like this, criminals can easily set up a Zelle account on their own device using a victim’s credentials.

You can defend yourself against these types of attacks the same way that you defend yourself from phishing attacks, malware, and other social engineering attacks: Keep your data and personal information secure, don’t divulge info to people you don’t know, and make your passwords unique and strong.

online shopping laptop with credit card
Never hand out your payment info to an individual you don’t know.

How to use the Venmo mobile app to make or receive paymentsIs PayPal secure? How the service protects your transactions, credit card data, and more‘How secure is my password?’: How to test the strength and security of your passwords using an online password-security tool‘Why is my PayPal money pending?’: 5 reasons why PayPal holds funds, and how to expedite your transaction

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