Meet Moon, a three-person startup that lets you pay for stuff on Amazon using bitcoin via the Lightning Network, bitcoin, Litecoin or Ether. The company has released a desktop browser extension for Google Chrome, Brave and Opera.
While some e-commerce retailers let you pay with cryptocurrencies, the biggest e-commerce platforms have yet to accept cryptocurrencies. Moon doesn’t want to wait, and wants to make it possible to pay with cryptocurrencies using current payment methods.
After installing the extension, Moon automatically recognizes when you’re on an Amazon checkout page and inserts the company’s own payment widget. You can see how much you’re going to pay in cryptocurrencies before accepting the transaction.
Right now, Moon lets you pay using two different ways. You can pay with any bitcoin wallet that works on top of the Lightning Network. Normal bitcoin transactions can take minutes to be confirmed on the bitcoin blockchain. The Lightning Network lets you open a payment channel between Lightning nodes to enable fast transactions.
Moon also lets you pay with your crypto balance on your Coinbase account. This way, if you hold bitcoin, Litecoin, Ether, etc. on your Coinbase account, you can also pay in seconds by leveraging Coinbase’s API.
Behind the scene, Moon uses prepaid value on Amazon. When you pay with Moon, the service automatically converts your cryptocurrencies, tops up your Amazon account and pays with your Amazon balance. Moon doesn’t charge additional fees.
In the future, Moon plans to expand beyond the U.S. and Canada and let customers in Europe use the browser extension. Similarly, Moon wants to expand to other e-commerce websites. Moon participated in the Entrepreneurs Roundtable Accelerator.
While unrest on the streets deepens in Hong Kong, local residents are going long on Bitcoin, short on banks.
Hong Kong is in the midst of a political crisis. And it’s not only changing the way citizens of Hong Kong view the Chinese government, but also the way locals view their economy.
At the same time, local interest in Bitcoin has reached unprecedented levels, which may be a sign that residents are turning to Bitcoin as a potential alternative to their traditional financial system and banks.
According to data from CoinDance, Bitcoin trading in Hong Kong reached an all-time high this week when measured in Hong Kong dollars. During the last week, more than $12,294,796 HKD (about $1,567,525 USD) worth of Bitcoin was exchanged in Hong Kong, surpassing the record of $11,666,176 HKD set in late January 2018.
If we express these figures in BTC, the numbers are similarly (yet not equally) impressive. A total of 173 bitcoins were exchanged throughout the week, which is a high not seen since April 2017, when traders moved 196 BTC in one week. That figure, however, pales in comparison to the 1086 BTC that were moved at the end of 2015, long before the rally that led Bitcoin to capture the world’ s attention.
Long Bitcoin, short bankers
But the recent spike in Bitcoin trading in Hong Kong cannot be separated from the ongoing political crisis, according to eToro analyst Mati Greenspan. “I can’t help but feel that this could very well be a sign that some Hong Kong protesters are seeing bitcoin as a way to opt-out of the local economy, which is run by governments and financial institutions,” Greenspan said in a blog post today.
The political conflict in Hong Kong has undoubtedly had a substantial impact on its local economy. Since July of this year, the Hong Kong dollar has steadily declined in value—a trend that is only exacerbated with each escalation of violence.
Just weeks ago, Hong Kong protesters rallied their countrymen to take their money out of local banks as a way of rebelling against the dominance exercised by the Chinese government throughout their economy.
The local banking system, however, was able to maintain liquidity and survive the protest thanks to a massive injection of local currency. But that isn’t a sustainable, long-term solution, precisely because of the way that the fractional-reserve banking system works. (Take it from Venezuelans who still can’t get their money out of local banks because there’s simply no cash to take out.)
If the Bitcoin trading trend in Hong Kong continues, it will be worth watching how the region develops as a reference point for crypto trading and international commerce. Let’s just hope that all those new Bitcoin holders in Hong Kong don’t share the Hong Kong Free Press’s problems with their crypto wallets.
Mobile money is fast blossoming in Africa, boosted by rising mobile adoption across the continent, but in Zimbabwe—which is battling a severe financial crunch—the most common cash-in and cash-out functionalities have just been killed off as the government battles to contain the country’s economic crisis.
Cash-out is the process of converting mobile wallet balances into hard cash while cash-in refers to the process of depositing cash into a mobile wallet. Mobile money agents facilitate these processes and normally, the agents have to get the cash from banks against their mobile money balances which are referred to as “float”. These agents then act as mini banks, basically facilitating deposit or withdrawal of cash (cash-in and cash out respectively) by account holders from mobile wallets.
These functionalities, in addition to sending and receiving money as well as payments at supermarkets and other merchants and cross transfers from and into bank accounts, constitute the most impactful financial inclusion use cases that mobile money is hinged on across Africa. Success cases also include Kenya and Tanzania while MTN is ready to roll out mobile money in Nigeria.
Yet in Zimbabwe, cash-in, and cash-out has just been killed off by the government, because authorities have concluded the functions are being abused. Zimbabwean mobile money agents, mostly with the dominant EcoCash platform, have been capitalizing on cash shortages in Zimbabwe to buy cash for re-sale to mobile wallet holders at a premium of up to 50%. This means that when trying to access funds in your mobile wallet through the agents, one would only get about 50% of their balance.
The disabling of cash-in and cash-out options on the mobile money menus of the Zimbabwean operators has drawn heavy criticism for the government on social media platforms. Moreover, the country’s financial sector is already in disarray, hobbled by foreign currency shortages in official channels and deficiencies of cash from the banks.
This has given rise to the high premiums on cash and also occasioned heavy discounts for cash purchases in retail outlets. However, the Reserve Bank of Zimbabwe justified the freeze on mobile money cash-in and cash-out functionalities, saying on Monday “some economic agents are engaging in illegal activities abusing the cash-in and cash-out facilities” which was compromising national payment systems.
Mobile money platforms such as EcoCash in Zimbabwe and M-Pesa in Kenya have already helped scale up financial access for Sub Saharan Africa’s large unbanked populations though analysts say interoperability of the platforms across borders is still sluggish. With the disabling of cash-in and cash-out options, there are concerns from the mobile money ecosystem in Zimbabwe that the important mobile wallet agents have also been put out of business while the government also stands to lose out on revenue from the 2% tax on electronic and digital transactions.
Zimbabwe has had cash shortages as its economy continues to struggle and mobile money has been essential for most daily transactions by Zimbabweans. Large chunks of the country’s economy run through electronic systems and mobile money, which is dominated by Econet’s Ecocash with a 95% market share. It’s estimated around 5 million transactions a day moving more than $200 million.
Most recently Ecocash has struggled to maintain the mobile money system working round the clock as the country has been hit with electricity shortages which have forced it to consider options including Tesla Powerwall storage batteries.
Africa is typically portrayed as a continent dependent on foreign aid and private investment, with money flowing from advanced economies into poor African economies. However, new research paints a very different picture. A June 2018 report by the Political Economy Research Institute (PERI) at the University of Massachusetts Amherst examined capital flight from 30 African countries between 1970 and 2015 and documented losses of approximately $1.4 trillion over the 46-year period ($1.8 trillion if lost interest is taken into account). This amount far outweighs both the stock of debt owed by these countries as of 2015 ($496.9 billion), as well as the combined amount of foreign aid all of the countries received over this period ($991.8 billion). The direction of capital flows actually makes the group of African countries a “net creditor” to the rest of the world – a startling conclusion when contrasted against common perceptions about Africa.
“The traditional thinking has always been that the West is pouring money into Africa through foreign aid and other private-sector flows, without receiving much in return. Actually, that logic is upside down – Africa has been a net creditor to the rest of the world for decades.”
–Raymond Baker, Founding President, GFI
What is Capital Flight?
Capital flight occurs when the value of assets and capital is shifted from one country to another, often from a developing country with a relatively weak currency into a more advanced economy with a hard currency such as dollars, pounds, euros, Swiss francs or Japanese yen. This is because many developing countries are often subject to currency devaluations, exchange rate volatility, high rates of inflation, or political instability, all of which can erode the value of assets. In contrast, wealth stored in hard currencies rarely loses it value. Capital flight also occurs when people want to hide money they have gained illicitly, or to avoid paying taxes, resulting in attempts to shift wealth out of the country and into offshore centers and tax havens. Capital flight can occur both licitly, through foreign investors withdrawing profits, and illicitly, via illicit financial flows (IFFs).
From a global perspective, capital flight diverts money and tax revenue from poor countries to rich countries and deprives developing countries of domestic resources needed for achieving the United Nations Sustainable Development Goals in healthcare, poverty, infrastructure and other critical areas of public investment.
Capital Flight & Trade Misinvoicing
GFI estimates that trade misinvoicing is the most common strategy for shifting capital from developing countries to advanced economies. Trade misinvoicing occurs when companies move money illicitly in or out of countries via the commercial trade system by falsifying the prices of goods on import or export invoices. This process not only facilitates illicit flows of capital out of African economies, it also represents a huge loss in taxable revenues and undermines the ability of many countries to build domestic tax bases. A report produced jointly by GFI and the African Development Bank in May 2013 found that illicit financial outflows from Africa between 1980 and 2009 totaled between US$1.22-1.35 trillion.
The PERI report also recognized trade misinvoicing as an important mechanism for capital flight, using data from international debt statistics and the International Monetary Fund’s Direction of Trade Statistics database to estimate a loss of US$1.4 trillion in capital flight. Both the PERI and GFI reports reveal massive capital outflows from Africa resulting from trade misinvoicing- outflows which greatly outweighed what Africa received in the form of aid or foreign private investment over the same period.
Sustained capital flight slowly erodes the tax base of a country in multiple ways. First, shifting capital abroad switches the form from the domestic currency to a foreign one. This increases the supply of the domestic currency on currency markets, thus decreasing the value of that currency relative to others on global currency markets, hurting its exchange rate. It also contributes to the problem of low domestic savings rates, which in turn undermines the ability of governments to scale up public investment and to engage in deficit spending on needed public goods. Less public investment within an economy means less money is available for hiring new workers or increasing production (real GDP). Therefore, capital flight drains an economy through weakening the value of a country’s currency, hurting the domestic banking sector, undermining public investment and the ability of governments to increase real GDP. This has been the case with many African countries for the greater part of a century. As a region held back by high levels of capital flight, it is no wonder that most African nations missed their Millennium Development Goals during the 2000-2015 period.
A Growing Number of Efforts to Reduce Capital Flight
Addressing capital flight requires the cooperation of both developing and developed countries in closing down the international systems that absorb illicit financial flows from Africa. The PERI report noted: “The acceleration of capital flight over the past two decades suggests a need for deep investigation into the structural factors of this phenomenon not only at the origin in search of push factors, but also at the destination to identify potential pull factors.” This means there is a critical role for advanced economies and international institutions to play in addressing the problem of capital flight from Africa.
Specifically, since much of this money is sitting in bank accounts in developed countries and secrecy jurisdictions, developed countries must take concrete steps to reduce such clandestineness and improve transparency and accountability. Additionally, developed countries must cooperate at the international level to address and reduce tax evasion by multinational corporations.
Fortunately, the problem of capital flight is increasingly recognized by the international community and there are a growing number of possible solutions. Such initiatives include proposals to increase trade fraud penalties and to establish “beneficial ownership” legislation so the actual owners of companies are known to authorities. A growing number of countries are adopting the anti-money laundering recommendations of the Financial Action Task Force and signing onto the Addis Tax Initiative, which will all help to prevent capital flight from African nations.
For African governments, a comprehensive list of policy recommendations to reduce capital flight was published in 2018 by the United Nations Economic Commission for Africa (UNECA). In the report, UNECA proposes that governments require multinational corporations to provide comprehensive reporting on their operations, indicate disaggregated financial reporting on by-country or by-subsidiary bases; prepare cost-benefit analyses before allowing them to invest in a country; and that African countries should join voluntary initiatives, such as the Extractive Industries Transparency Initiative. It also proposes that African governments should provide training to empower investigators responsible for combating IFFs; establish greater inter-agency coordination between revenue authorities and ministries of finance in developing countries to build capacity in this area and strengthen transparent procurement procedures.
Capital Flight is both an African and an International Problem
Capital flight is a serious concern for all governments, both developed and developing, as it depletes revenue collections, undermines development initiatives and hinders effective governance. The data increasingly shows that the narrative of Africa as a poor recipient of capital obscures the reality that Africa in fact acts as a net creditor to the rest of the world, and that this is not just an African problem – but rather responsibility lies with both African and developed countries. GFI supports the recommendations listed in UNECA report, and urges governments in Africa, in the advanced economies, and international institutions to implement them. The injustice of the poorest countries in the world sending capital to the richest countries cannot be allowed to continue.
The cost of sending money through banks and money transfer operators is high in Africa at an astronomical rate. On average, sending an equivalent of $200 costs 9.3 percent of the value transferred. This is the highest remittance rates anywhere in the world according to the world bank’s 2019 report. In contrast, the use of cryptocurrency based fintech firms such as Bitpesa cuts the cost by 90 percent.
Exorbitant Bank Charges On Remittance The amount sent to Africa by Africans abroad is estimated to be about $46 million to support families in their countries. Most of the money sent is used to cater for education, food, clothes among others. Meanwhile, a lump sum of the payment is being taken by the financial institutions as transfer fees.
The world bank notes that the bank is the most expensive agent for sending money back to Africa at 10.2 percent, followed by most transfer operators at 7.7 percent and post office at 5.5 percent. This is very much costly in comparison to the sustainable Development Goals target of cutting financial transfer costs to within 3% of total transaction value by 2030.
Cryptocurrency-Based Remittance In Africa While the financial institutions have been charging Africans exorbitant price for Remittance, crypto-based remittance has become a solace for Africans, because of its low fees, efficiency and speed. One of crypto-based Remittance platforms offering solace to Africans is Bitpesa.
Bitpesa was created in 2013 by an American political science graduate Elizabeth Rossiello. The firm initially focused on facilitating bitcoin-supported cash transfers between citizens of the U.K. and Kenya. However, Bitpesa now has operations in eight African countries: the Democratic Republic of the Congo, Ghana, Kenya, Morocco, Nigeria, Senegal, Tanzania, and Uganda.
According to Stephany Zoo, head of marketing at Nairobi-based Bitpesa, he stated that the firm enables people in Africa to send or receive money from around the world at a fraction of the cost charged by traditional agents.
Zoo explained that “We process our remittance payments with a blend of traditional and personal insurance such as pooling, as well as using cryptocurrency. Our fees are 1 to 3%, so it’s significantly lower than those mentioned in the World Bank report. A lot of our clients are money transfer operators that actually move the money, and we are the underlying technology or software behind what they do as well as being their foreign exchange provider.”
Other crypto-based Remittances or related platforms offering Africans solace include Uganda’s Coinpesa which is primarily a crypto exchange and does not directly engage in the remittance business, but process trades that originated as Remittance.
Also, there is Sure Remit in Nigeria; it charges between 0-2% for non-cash remittances. The company claims to host a network of hundreds of merchants throughout the world and uses an in-house token, RMT. In southern Africa, Wala utilizes its digital coin called Dala to help users send money, buy airtime and data, pay bills and school fees in several countries at no cost.
The world bank projects the African Remittance market to grow by 4.2% in 2019 and 5.6% in 2020. Bitpesa’s Zoo is optimistic crypto-based Remittance is going to claim a share of the market.
From artificial intelligence to mobile applications, technology helps to increase your access to secure and efficient financial products and services.
Since fintech offers the chance to boost economic growth and expand financial inclusion in all countries, the IMF and World Bank surveyed central banks, finance ministries, and other relevant agencies in 189 countries on a range of topics and received 96 responses.
A new paper details the results of the survey alongside findings from other regional studies, and also identifies areas for international cooperation—including roles for the IMF and World Bank—and in which further work is needed by governments, international organizations, and standard-setting bodies.
Foremost in all countries’ minds is cybersecurity.
Some interesting and startling trends emerged in the survey: foremost in all countries’ minds is cybersecurity.
1. Cybersecurity and data protection risks recognize no boundaries with spillovers across sectors and countries, and governments are working hard to get a handle on the issue. Awareness of cyber risks is high across countries and most jurisdictions have frameworks in place to protect financial systems. Most jurisdictions—79% of those with higher incomes according to the survey results—identified cyber risks in fintech as a problem for the financial sector.
But evidence from the survey suggests that only a third of jurisdictions have analyzed the technological interdependencies between networks, systems, or processes within the financial sector or looked at concentration risks among big technology providers that could threaten financial infrastructure. A high proportion—83 percent of high-income countries—report some monitoring of cyber risks related to third-party service providers, but only half of lower-income jurisdictions have specified minimum requirements.
2. Asia is ahead of other regions in many aspects of fintech. In China, the massive scale of its markets and a regulatory “light touch” in the early years supported fintech development, with China emerging as a global leader. In India, large-scale adoption of mobile payments and increase in money transfers have driven growth in the mobile payments.
But the region’s use of fintech exhibits large gaps between the rich and poor, men and women, and rural and urban areas.
3. Sub-Saharan Africa is a global leader in mobile money innovation, adoption, and usage. The region leads the world in mobile money accounts per capita (both registered and active accounts), mobile money outlets, and volume of mobile money transactions. Close to 10 percent of GDP in transactions are occurring through mobile money, compared with just 7 percent of GDP in Asia and less than 2 percent of GDP in other regions. Across Africa, the adoption and use of technology in the provision of financial services is changing the way in which financial service providers operate and deliver products and services to their customers.
4. Europe is not unified when it comes to fintech adoption. Given high mobile phone and internet access, the potential is high for fintech to improve access to, and usage of, payments and other financial services in Europe. The modernization of the EU’s data policy frameworks has helped to clarify rights and obligations in the data economy, which is an issue that many countries must address. However, there are important regional differences in the adoption of digital finance, the prevalence of cash-based payments, account ownership and usage, and savings and credit in the region. For example, a considerable gap also exists between the United Kingdom and the rest of Europe—that country being significantly ahead of the rest of Europe both in terms of fintech innovation and investment.
5. Digital currencies backed by central banks could become reality. The survey reveals wide-ranging views of countries on central bank digital currencies. About 20 percent of respondents said they are exploring the possibility of issuing such currencies. But even then, work is in early stages; only four pilots were reported. The main reasons cited in favor of issuing digital currencies are lowering costs, increasing efficiency of monetary policy implementation, countering competition from cryptocurrencies, ensuring contestability of the payment market, and offering a risk-free payment instrument to the public.
Source IMF Blog by Tobias Adrian and Ceyla Pazarbasioglu