In many parts of the world, bitcoin and its cryptocurrency cousins are viewed more as long-term investments. Some markets even push bitcoin as "digital version of gold or silver."
Bitcoin itself has had to struggle to get a foothold with merchants as replacement of fiat currency despite being the very first cryptocurrency ever introduced. If you are a fan of bitcoin, take notice: things are changing in Asia.
All indications suggest that bitcoin is gaining steam in Japan and a host of other Asian countries.1 But the rise in bitcoin's popularity in Asia is not about investments. Rather, Asian countries are seriously considering bitcoin as a day-to-day currency for the masses. Merchants are already jumping on board, choosing to accept bitcoin after discovering how much easier it is to use compared to fiat currency.
Last year's hard fork
Despite bitcoin being the first ever cryptocurrency, it is not the only one. Moreover, bitcoin spawned the birth of Bitcoin Cash when some of the original currency's developers wanted to create a hard fork of the current blockchain to increase transaction speeds and improve security. That hard fork turned out to be very good for cryptocurrencies in general, despite some reservations among original bitcoin owners and blockchain developers.
A second hard fork occurred on August 1, 2017. That fork was initiated by a Chinese bitcoin mining pool known as ViaBTC. Prior to its implementation, there were some fears that the value of bitcoin would drop significantly enough to cause a worldwide pull-out. That never happened. In fact, many of the experts who were predicting doom and gloom in July of that year now say bitcoin is stronger because of the hard fork.
What does this have to do with Asian merchants? Quite a lot, actually. One of the hindrances to merchant adoption of bitcoin is the general volatility of cryptocurrencies. If a merchant accepts bitcoin valued at US$7,000 per coin today, he will not be happy when there's a run on bitcoin tomorrow and its value plummets to $6,000 per coin. That is a significant loss in a single day.
Bitcoin's two hard forks are relevant to merchants because they added stability to bitcoin as a day-to-day currency. Asian merchants are looking for that. They already have enough trouble with the instability of their own fiat currencies - the Japanese Yen excepted. They want to see more stability with bitcoin before fully embracing it.
Increased bitcoin confidence
There are a lot of different things that affect national and regional economies. Consumer confidence is a big one. It applies to merchant adoption of bitcoin inasmuch as merchants are willing to entertain whatever gives customers the confidence to buy. Hence the greater willingness to accept bitcoin as a payment.
As the average consumer places more confidence in bitcoin, so do merchants and bankers. Bitcoin's two hard forks have served to build confidence in the cryptocurrency alongside greater perceived stability. It all adds up to average consumers being more willing to purchase bitcoin themselves. And when they purchase it, they are more willing to spend it.
Asia's confidence in bitcoin goes back to how consumers actually view the cryptocurrency. Where Westerners tend to look at bitcoin as an investment, Asians look at it as a means of buying things and paying their bills. That is the key difference between merchant adoption in Asia and elsewhere. Asian merchants have greater confidence in bitcoin because their customers do. This includes both domestic and cross border customers.
Less expensive cross-border transactions
Doing business in Asia is pretty straightforward within the boundaries of a single country. However, Asian markets are notorious for being both complicated and expensive when you start talking cross-border transactions. Bitcoin is seen as one of the most effective ways to get around the perceived problems.
As you may know by now, one of the challenges of fiat currencies is the concept of centralization. In other words, most countries have their own central banks responsible for controlling both money supply and government monetary policy. But there are also regional and global banks that play a role as well. The centralization of fiat currencies inevitably creates a boondoggle of bureaucracy and a litany of fees and charges associated with digital payments.
In short, cross-border transactions in Asia using fiat currencies is prohibitively expensive. Asian merchants do not like doing business across borders because the price they pay is too high. That is, unless those merchants accept cryptocurrency.
Bitcoin is, by design, decentralized. There is no central bank controlling its volume or value. There is no central government regulating how it can be used. Bitcoin can be traded, spent, and transferred anywhere in the world without losing its value due to fiat currency exchange rates and central bank fees. This makes it incredibly attractive to Asian merchants.
Wholesalers asking for bitcoin
Cross-border transactions are especially difficult for wholesalers. They buy products from all over Asia, import them, and then sell them at retail. According to Coin Desk, bitcoin is very attractive to wholesalers who often find that the transaction fees and bottlenecks associated with fiat currencies harms their businesses. Coin Desk says that wholesalers throughout Asia have been begging for the option of paying with bitcoin in recent years.2
To help facilitate bitcoin for wholesalers, manufacturers began teaming up with BitPay. Their efforts were nothing short of successful. Today, wholesalers looking for the most efficient and financially responsible way to conduct cross-border transactions are using bitcoin.
Bitcoin booming in Japan
If there is any doubt among Western investors about the strength of bitcoin as a day-to-day currency, they need look no further than Japan. Japan is one of several Asian countries seriously considering adopting bitcoin as standard currency alongside the traditional yen. Government leaders are being forced to at least consider the idea thanks to the hundreds of thousands of merchants who now accept it.
According to a recent report by CCN, some of Japan's largest hotels, airlines, and retail operations are already doing business with bitcoin. Experts expect hundreds of thousands of additional merchants will soon start accepting bitcoin through AirRegi, Japan's first name in point-of-sale merchant services.
Among the anticipated new bitcoin adopters will be restaurants, cafes, nightclubs, and department stores. The very backbone of Japan's economy is rapidly moving toward bitcoin for its convenience, efficiency, and lack of bureaucratic interference. And by the way, China and the Philippines are also considering adopting bitcoin as day-to-day currency, according to CCN.
Customers are spending more with bitcoin
All of the reasons explaining merchant adoption of bitcoin discussed thus far have dealt with the 'nuts and bolts' of running a business in Asia. We have looked at cross-border frustrations, economic stability, and consumer confidence. But there is one additional reason that may trump them all: data suggests that consumers tend to spend more per purchase when using a cryptocurrency.
BitPay CEO Stephen Pair told Coin Desk of one particular cosmetics company that discovered their crypto-paying customers were buying more. As a result, the company is looking to add more cryptocurrencies to what it already accepts. More payment options mean more customers and higher value transactions.
It's not quite clear why consumers spend more freely with cryptocurrency, but there is plenty of speculation. One line of thinking is that consumers give themselves permission to spend more based on the knowledge that the fees and charges incurred for doing so will not be as high as they would be with a credit or debit card.
Regardless of the reasons, the fact still remains that transaction values go up when crypto is used. So merchants looking to get on board are going to naturally gravitate to bitcoin as the standard cryptocurrency. Bitcoin enjoys a tremendous amount of support among cryptocurrency exchanges, digital wallets, payment processors, and merchant service providers.
Bitcoin perfect for non-traditional businesses
One final thought involves non-traditional businesses like online casinos and adult-oriented enterprises. These operations often times have trouble finding affordable banking solutions due to reluctance among commercial banks and payment processors. Bitcoin is the perfect solution.
An online casino may face higher fees and surcharges from traditional banking services because of the nature of its business. On the other hand, bitcoin is blind. It doesn't care what industry a business is engaged in, or where the business is located. Casinos can accept bitcoin payments without having to worry about restrictions and excessive charges.
Online gamblers are equally happy because bitcoin gives them yet another option. If they can deposit with bitcoin, they do not have to provide banking information or credit card numbers to their favorite casinos. They can play anonymously without risking access to their personal data.
Bitcoin offers so many advantages to both merchants and consumers that it is getting harder to not get on board with it as a day-to-day currency. Asian merchants know this all too well. As bitcoin stability and consumer confidence increases, growing numbers of Asian merchants will accept it for payment.
1) Bitcoin Adoption Drastically Increases in Japan Despite Recent Hard Fork, CCN.
2) Bitcoin Merchant Adoption Might Just Be Accelerating In Asia, Coindesk.