To contain the risks, the Central Bank of Myanmar (CBM) earlier this month announced that it does not recognise cryptocurrencies as an official currency and that financial institutions in Myanmar are not allowed to accept or facilitate transactions involving digital currencies.
Cryptocurrency valuations have been volatile since they began trading in recent years. On April 1, the price of one bitcoin jumped 18 percent to US$4,900 in just 24 hours and closed the month at US$5200. Staying above the much-vaunted US$5,000 level was important, many commentators argued, to form the support level for the next bull-run.
Myanmar buyers with access to an online payment method bought into the rising trend and local advertising for exchanges became more frequent on social media, which alarmed the CBM.
This is because cryptocurrency is not tangible in the way that government-issued kyats, baht, yen or dollars are. Unlike gold or silver - metals traditionally used to hedge against inflation - it has no physical properties.
Bitcoin is one of the first cryptocurrencies to gain traction. It attracted a first major wave of investment frenzy back in 2011, a few years after the currency’s invention.
In late 2017 the cryptocurrency market experienced a massive run-up in price, with bitcoin leaping towards an all-time high of US$19,500 in December that year. Investments flooded into the market, seeing the alt-coin market mature alongside lots of scam investment schemes and questionable Initial Coin Offerings.
U Aung Aung, an IT manager at an international company in Yangon, first considered buying cryptocurrency back in 2017 - after a conversation with a foreign colleague. He has an account with Skybit, which is currently the only local “blockchain services platform” in Myanmar.
“I bought US$20 worth of bitcoin after a conversation at work,” U Aung Aung said. Global connectivity and instantaneity hold a certain appeal to Myanmar’s tech-savvy early adopters like U Aung Aung, particularly given the restrictions on banking in the country.
Though an experienced IT professional, U Aung Aung admitted it was difficult to find reliable information in the Myanmar language about bitcoin. “There are a few Facebook groups and Skybit, and that’s about it,” he said.
Skybit advertises itself as “the only platform in existence that bridges Myanmar with global e-commerce and aid. Other e-commerce websites that serve Myanmar are only for trade within Myanmar or to initiate business-to-business dealings”.
With the CBM’s recent announcement it’s difficult to know what the future holds for Myanmar in terms of cryptocurrency and investment.
Currently, just 17 countries, including the US, Singapore, Japan, Ukraine, the UK, Germany, Switzerland and Hong Kong officially allow transactions in digital currencies. These countries have already enacted laws to protect users from fraud and money laundering.
Myanmar has yet to reach that level though. Until then, some industry watchers reckon punting in cryptocurrencies will continue. “The CBM has not prohibited the use of cryptocurrencies under the law. It has just issued an announcement.
As there is no official law, it can’t be said that trading in digital currencies is illegal,” said U Nyein Chan Soe Win, a fintech expert and CEO of Get Myanmar.
The way he sees it, “before making crypto illegal, its impact on the local currency and compatibility with existing policies should first be analysed and discussed,” he said.
In the meantime, education around crypto technology, its security, convenience and functionality could help the sector grow. For example, Manchester Metropolitan University recently announced in the Myanmar Times that it will launch its award-winning fintech course in Yangon, attracting the brightest minds in the finance and technology sectors.
As central banks and regulators around the world come to grips with the new crypto paradigm, it’s difficult to know which path Myanmar chooses to follow: the more restrictive regulatory regime, much like that of China, or a more open one like Singapore and Japan.