You can read Part 1 and Part 2 for the full context:
Convincing Malaysian big businesses to adopt cryptocurrencies is a like engaging in an exasperating chicken-and-egg debate. They will be asking:
Where are the users?
What is the regulatory framework?
Who are the service providers?
To which the only way we can reply is: Do it and they will come!
You can imagine how unpopular this sounds in the boardroom. From their perspective, the marginal benefits of accepting cryptocurrencies today does not compensate for the significant uncertainties that come with implementation. Hence as cryptocurrency enthusiasts, we need to acknowledge that our holdings will not be directly spendable “out there” anytime soon. Which is fine.
Not only are there myriad workarounds, but shoving cryptocurrencies down the throat of corporate Malaysia is missing the point. We neither have an unbanked problem nor a banking crisis; i.e. there is not much to complain about with the current local financial system. So if we thoughtlessly echo the battle cries appropriate in other markets over here, we are going to sound like lunatics.
That being said; if we want to produce a mature Malaysian cryptocurrency ecosystem, then we must ensure our cryptocurrencies circulate around, and not just idling in everyone’s private vault. We do need to convince users to spend their holdings, and we do need to convince sellers to accept them. Otherwise we will only succeed in producing a community of speculators.
Since Malaysian big businesses are unlikely to support our agenda for now, we need to facilitate this circulation via an alternative strategy. Remember that cryptocurrencies enable seamless, frequent online transactions between individuals, or even between autonomous machines; a breakthrough we should leverage to create new, blue-ocean markets.
Such “peer-to-peer” online commerce has been around for a while (just look at all the Malaysians selling stuff on Facebook), but buyers and sellers in this space lack the sophisticated back-end systems of large e-commerce players. These are not highly automated operations – oftentimes terms are discussed and sales closed through direct negotiations between buyer and seller right within chat applications.
However with extreme personalization comes friction and scalability issues, especially when it comes to payment. An ad-hoc entrepreneur interested in selling some home-made lemang through Facebook during Ramadan wouldn’t bother setting up a legal entity, much less a merchant account to accept credit cards – hence would need to rely on cumbersome online banking transfers from his customers.
I believe it is in these situations where cryptocurrencies can shine. Imagine if we have for example… a widget that generates a self-destructing QR code out of a cryptocurrency address embeddable in WhatsApp or Facebook chat. Sellers can then share payment details and confirm receipt of any value from any customer in real time. This significantly cuts through the payments inconvenience for buyers and sellers alike in “peer-to-peer” online commerce.
It is often the simplest technology that achieved the most widespread adoption. Cheap, QR-code enabled peer-to-peer micropayments area already exploding in China (albeit these are driven by centralized providers). Since I don’t see a prevalence of these solutions in Malaysia yet, it is a golden opportunity for cryptocurrencies to take the ball over here and just run with it.
The beauty of peer-to-peer commerce is that it can grow with minimal regulatory and support systems oversight, but it will not produce the quantum leap in adoption that we need. Eventually we as the community will have to go back to courting those finicky Malaysian big businesses. The good news is, once we have a vibrant peer-to-peer commerce scene, the answer to the “Where are the users?” question becomes self-evident.
Next comes regulation. In this regard we have to accept that a) no Malaysian big business will sign up cryptocurrencies without a clear regulatory / risk framework and b) crafting that regulatory framework is solely up to us and the authorities. I will elaborate on this in a future post but for now, let’s assume through our perseverance, we managed to produce something favourable.
The final requirement for business adoption of cryptocurrencies is the availability of service providers. These include payment processors, system integrators, lawyers, accountants and auditors – all necessary to incorporate cryptocurrencies into existing workflows. For SMEs, there are further requirements that these solutions be off-the-shelf, compatible with popular back-end ERP suites, and acquirable at reasonable cost. Hopefully members of the community can help exploit these opportunities locally, or help import solutions already released elsewhere.
I hope by approaching the issue in a stage-by-stage manner, we can encourage Malaysian sellers to accept cryptocurrencies directly as a method of payment within the medium term. They managed to make it happened in Japan recently, and results have been spectacular to say the least.