The Puerto Rican economy is very volatile right now. The ongoing crisis seems to be getting worse everyday. The small population of Puerto Rico has one of the biggest outstanding debts compared to other large countries surrounding it. With over 70 billion USD in debt and a recent credit rating downgrade the citizens are experiencing the turmoil first hand. On August 3, 2015 the island defaulted on a 58 million USD bond payment and many experts agree this debt is not payable. Residents of the region are trying to find ways to move their wealth away from the county to family members abroad with vessels like Paypal and Bitcoin.
Also Read: The Bitcoin ATM: The Improved Teller Machine
However the company Paypal has ceased its services in Puerto Rico and cannot help citizens relocate their assets. In an announcement sent to US customers, which includes the small island the company states: “Paypal will no longer provide its payment services for transactions originating from Puerto Rico.” The business decision to stop services for mainland Puerto Ricans is due to de facto capital controls preventing assets and wealth from leaving the country. Because the region is in such fierce debt the government believes they can help collect by adding a 2% tax to people trying to reallocate funds. Just another failed attempt of blatant Keynesian economics and state coercion.
Greece Saw Bitcoin Increases During Capital Controls
So what does this mean for Bitcoin? Well the virtual currency has grown in popularity in the Caribbean region. Coinbase had recently added their services to the island of Puerto Rico and the digital currency can be bought and sold there. Bitcoin is a system Puerto Ricans can use to escape the capital controls being implemented on its people. When the Economic crisis in Greece took place Coinbase announced that Bitcoin sales in Europe increased. They also offered no fees to those buying in Euros. The founder of BTCGreece reported that their increase of bitcoin purchases increased by 300% during the crisis. The Greek citizens themselves are teetering with a large debt problem and capital controls.
Puerto Rico is an island region, which is under U.S. regulation but also uses localized governance. The Puerto Rican Act has been said to be in the public’s best interest to keep assets circulating in the local region. In June the economic governor of the island, Garcia Padilla, stated the country’s debts are “not payable” and the economy was is major need of debt restructuring. Bitcoin enters the discussion with many advantages for Puerto Ricans to escape capital controls and government restructure. One advantage is users can remain relatively pseudo-anonymous and enjoy global access through the web. Also Bitcoin fees on the network are extremely low as compared to the capital controls imposed on the island. With these features the virtual currency can act as a store of value for the islanders and help them avoid austerity measures.
No Bail Outs From The Mainland U.S.
White House Spokesperson Josh Earnest explained to press there was no intentions of the US planning to “bailout” the region of Puerto Rico. However the White House correspondent explained that the US will remain “committed” to working with government officials while they engage in debt restructure. Although Earnest says:
“I can say is that Puerto Rico currently has no access to a tested, restructuring regime for any of its public debt. This includes its municipal and public corporation debt, which, in the 50 states, would ordinarily be subject to a Chapter 9 bankruptcy process.”
~Josh Earnest, White House Spokesperson
Virtual currency boosters everywhere think this is the perfect time for the Island to start using Bitcoin. With its advantages of being a store of value and escape tool from capital controls the currency shows merit when it comes to the debt crisis. Only time will tell if Puerto Ricans start using BTC to help get themselves away from hyperinflation and austerity measures. With Paypal and Venmo ceasing its services in Puerto Rico avoiding these taxes are becoming increasingly harder as the economic turmoil grows larger.
Bitcoin Is The New Decentralized Remittance Tool And Safehaven
Puerto Rico does have a Bitcoin ATM and access to Localbitcoins. The surge in global internet access has provided Latin America with the opportunities to use the digital currency as a safe haven. For Puerto Ricans and the rest of Latin America the currency is a breakthrough for cross border remittances and could possibly catalyze into a great adoption period. With its ability to bypass traditional finance restrictions, countries all around the world in debt (which is basically everyone) are taking a look at this extraordinary cryptography based money. Instead of localized austerity measures and capital controls the wealth is allowed to tap into the global market and preserve itself through its means. Governments have yet to realize that force and coercion is creating chaos and doubt in the economic challenges citizens face.
Many believe Bitcoin can help Puerto Ricans and Latin American regions immensely.
Do you think Bitcoin can help Latin American countries and the Caribbean? Let us know in the comments below.
Images courtesy of Pixbay, Shutterstock, and Redmemes