Kyrgyzstan Runs Bitcoin Experiment

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The first and only Bitcoin ATM in Central Asia was installed in small cafe in Kyrgyzstan’s capital, Bishkek. The ATM converts dollars into Bitcoins, which are increasingly used in online transactions.

The ATM’s owner, an Italian financial analyst Costa, believes that his machine could impact the way one million migrant workers transfer their earnings home from Kyrgyzstan. According to estimations of the World Bank, migrant remittances totaled the equivalent of 31% of Kyrgyzstan’s GDP in 2013. Most of that money was transferred via expensive, fee-based services like Western Union and its Russian and CIS analogues. Costa, a former analyst with Goldman Sachs, is sure that Bitcoin represents a low-cost, secure and confidential alternative.

The world’s most popular cryptocurrency was invented by a group of anonymous Internet users five years ago and is not controlled by national governments or banks. Bitcoin offers a P2P encrypted payment system which could be readily converted into cash. However, the currency is very popular as a payment method, with more and more stores and companies accepting it in exchange for products or services. There are no fees or they are nominal. The value of Bitcoin depends on supply and demand, and the rate is currently about $640. However, the cryptocurrency also faces some hurdles, starting with a lack of understanding.

In the meantime, the Italian financial analyst views Kyrgyzstan as a very attractive place to implement a Bitcoin facilitated transactional system due to the country’s relative weakness in regulatory systems. The country suffers a lack of legacy financial systems and the government seems open to try new things.

The dark side of the experiment is that the local Customs Union, which currently consists of Russia, Belarus and Kazakhstan, and which Kyrgyzstan is expected to join by next year, doesn’t seem to approve. Its current members have already taken cautiously negative views of cryptocurrencies, though none of them have issued outright Bitcoin bans thus far. But in this region, anything perceived to challenge centralized state control may die fast without a proper support.

Costa sees his investment as proof of his enthusiasm – of course he doesn’t expect to recoup the machine for several years, earning a nominal fee off each transaction, but the fact is that without any advertising, several users have already tried the machine out within the first days. Hopefully, Bitcoin can find a comfortable home in Bishkek.