Costa with his bitcoin machine. Photo: Bert Cramer
In the corner of a small pizzeria in central Bishkek, an experiment is unfolding. Central Asia’s first and only bitcoin ATM converts dollars into the world’s most popular cryptocurrency. The machine – which looks like one of the city’s ubiquitous electronic pay terminals – offers a way to convert hard currency into a digital medium that is increasingly used in online transactions.
That could impact how Kyrgyzstan’s estimated one million migrant workers transfer their earnings home, says the machine’s owner, Emanuele Costa, an Italian financial analyst. The World Bank estimates that last year migrant remittances totaled the equivalent of 31 percent of Kyrgyzstan’s GDP. Most of that money, several billion dollars, was transferred through expensive, fee-based services like Western Union and Zolotaya Korona. Costa, a former analyst with Goldman Sachs, sees bitcoin as a low-cost, secure and confidential alternative.
Bitcoin, invented by a group of anonymous Internet users in 2009, is the first and most prominent digital cryptocurrency to gain wide circulation. Not controlled by national governments or banks, bitcoin offers a peer-to-peer encrypted payment system that can be readily converted into cash or, increasingly, used in exchange for products or services. Fees, when they exist, are agreed upon by users and are usually nominal. Bitcoin’s value fluctuates based on supply and demand; one bitcoin is currently worth about $642.
Though Costa is a staunch believer in bitcoin’s potential, he admits that it faces some hurdles. Foremost is a lack of understanding.
Building on his previous work developing financial-literacy projects for the University of Central Asia, Costa has begun organizing bitcoin meet-ups as an informal, though structured, means of educating interested people about the potential of bitcoin and other peer-to-peer financial platforms to improve and simplify their economic lives.
Costa views Kyrgyzstan’s relative weakness in regulatory systems as, paradoxically, a strength. “Due to the lack of legacy [financial] systems and the government’s openness to trying new things, Kyrgyzstan is a very attractive place to implement a bitcoin facilitated transactional system,” Costa told EurasiaNet.org.
But the Moscow-led Customs Union – which Kyrgyzstan is expected to join by next year – could spell trouble. Already, members Belarus and Kazakhstan have taken cautiously negative views of bitcoin and other cryptocurrencies. Russia’s Prosecutor General has warned that “systems for anonymous payments and cyber currencies […] are money substitutes and cannot be used by individuals or legal entities.” None of the current Customs Union members have issued outright bitcoin bans, but anything perceived to challenge centralized state control is unlikely to survive for long.
What’s more, in a part of the world as opaque and corruption-riddled as Central Asia, transparency activists might find bitcoin worrisome because there is no way to trace bitcoin users’ transactions.
But Costa believes that the technology behind bitcoin cannot be legislated away. Bitcoin only represents the first wave of game-changing technological innovations to come, he says. And his investment is proof of his enthusiasm. Although he does not expect to recoup his investment in the machine for several years – he earns a nominal fee off each transaction – what matters to him is that in the machine’s first two weeks of operation, even without advertising, several users have tried it out. That’s proof, Costa says, that bitcoin can find a comfortable home in Bishkek.
Update: Since this article appeared, Bishkek's La Dolce Vita pizzeria has been bombarded with calls. For more information, please contact Costa directly.