Page 53 - Trends in Telecommunication Reform 2016

1.6.3 Bitcoin currency from BTC 100 to BTC 500. At the time of the latest
funding round, April 2014, these values would Chapter 1
Bitcoin is a digital currency (represented by the have corresponded to around USD 50 000 and
currency symbol "BTC") that can be used to USD 250 000, respectively. The target markets of
finance companies. Seedcoin, a start-up incubator, the start-ups vary by region and can include Africa
has invested exclusively in businesses using (TagPesa) and Latin America (mexBT). TagPesa is
bitcoin currency, because it focuses on developing an exchange and remittance company, based in
the bitcoin currency ecosystem. This financing Kenya, that aims to make it easy and convenient
approach is typically made available to start-ups. for people to make transactions and transfer
money internationally . One of the service’s
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Seedcoin also raises funds in bitcoin currency. features gives Kenyans the ability to deposit and
This task can carry considerable risk, due to the withdraw money from their M-Pesa (mobile
currency’s volatility. Between January 2014 and banking) accounts . In 2015, an Australian bitcoin
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April 2015, for example, bitcoin lost over 60 per exchange named "igot" acquired TagPesa.
cent of its value against the U.S. dollar. Over the
same period, the euro lost 22 per cent and the The lack of regulation of digital currencies is a key
British pound lost 10 per cent against the U.S. factor in their associated risk. The uncertainty
currency (see Figure). This strong value volatility and distrust around digital currencies can lead to
suggests that digital currencies may have a higher governments being reluctant to regulate them.
level of risk compared to more stable currencies. The impact of regulation on the success of digital
Entrepreneurs receiving funding in digital currency, currencies was shown in January 2015, when
therefore, need to consider its volatility as a risk. Coinbase was announced as the first regulated
Another example of the high level of risk is the bitcoin exchange in the USA. The value of the
hacking theft of BTC 750 000 (USD 575 million) currency immediately rose to reflect that news,
from the bitcoin exchange MtGox in 2014 . The and then immediately fell again when California’s
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uncertainty around digital currencies has led state government labelled the announcement
countries such as China and Russia to restrict how false .
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they can be used in their jurisdictions.

Based on previous funding rounds from Seedcoin,
the size of the investment per company has ranged
Figure 1.7: Percentage change of selected currencies against the USD from January 2014 to March 2015

40%
% change of currency against USD -20%
20%

0%

-40%

-60%

-80%
Jan 2014 Mar 2014 May 2014 Jul 2014 Sep 2014 Nov 2014 Jan 2015 Mar 2015

BTC/USD EUR/USD GBP/USD

Source: Oanda, 2015

Trends in Telecommunication Reform 2016 35