FEATURE-South Africa’s bitcoin beach aims to escape crypto crash

* South African township launches bitcoin economy

* The founders hope the cryptocurrency will help fight poverty

* Critics warn of risks for vulnerable users

Almost every afternoon, surf instructors walk down the sandbar that separates their township from South Africa’s Mossel Bay beach to earn bitcoin in exchange for teaching the kids how to catch the famous waves.

A fall in cryptocurrency prices this year has driven many small investors to ditch their coins, but the charity surf school coaches are all paid in bitcoin as part of a fledgling local initiative aimed at boosting financial inclusion. “Before I wanted to spend (money) quickly,” said Luthando Ndabambi, a senior surfing instructor at The Surfer Kids charity.

“But now I’m saving, I’m thinking about the next ten years,” said Ndabambi, sitting at the charity’s beachfront office where wetsuits were hung up to dry. Crypto investors took a series of blows this year: Bitcoin’s value has fallen by around 60%, while digital coins Luna and TerraUSD collapsed, and the implosion of major crypto exchange FTX left an estimated one million creditors facing billions of dollars in losses.

But as regulators demand tougher controls on crypto, some bitcoin evangelists who believe the coins are a force for good are channeling money into socially minded projects. The Bitcoin Ekasi scheme – which means ‘Bitcoin in the Township’ in local slang – was launched last year by Hermann Vivier, who owns a Mossel Bay tourism company and runs The Surfer Kids charity.

He said the scheme to encourage the use of bitcoin among residents of the impoverished beachside town of JCC Camp could help people who struggle to access traditional banking services because of fees or practical barriers such as a lack of identity documents. “We’re seeing daily (bitcoin) adoption out of necessity for the unbanked billions,” Vivier told the Thomson Reuters Foundation.

“I wanted to democratize bitcoin, to help people access it so they can have the freedom to act and think about their future.” However, the volatility of the value of cryptocurrencies means they pose a risk to low-income users, said Ashlin Simpson, a lead technical expert at the University of Cape Town’s Center for Social Science Research.

“People in already vulnerable financial situations cannot afford to take financial losses,” she said, adding that some may also lack the technical knowledge to understand the complex and largely unregulated systems. “Nothing comes without risk, and crypto is not the panacea for financial freedom.”

BITCOIN BEACH Cryptocurrencies, which allow “peer-to-peer” transfers between users online without intermediaries, were originally designed to be free of control by government and central bank authorities.

During the COVID-19 pandemic, Vivier turned to bitcoin donations to keep outreach surfing afloat, and from there launched the wider Bitcoin Ekasi scheme. He was inspired by – and is now partially funded by – Bitcoin Beach in the surfer town of El Zonte in El Salvador, where businesses began accepting bitcoin payments in 2019, before the digital currency became legal tender in the country last year.

Today, about 10 convenience stores in JCC Camp township accept bitcoin payments along with cash. The project uses donations to top up shopkeepers’ bitcoin savings to their former rand equivalent if their value falls by more than 30%.

Instructors for The Surfing Kids can also use bitcoin via apps that allow them to convert it into vouchers for everything from electricity to pizza. Bitcoin Ekasi has founded a free learning center that pays kids at the surfing school a weekly bitcoin reward worth about 30 rand ($1.74) to take lessons in literacy, numeracy and bitcoin basics.

“When I first heard about bitcoin, I thought it was a scam,” said Nomsa Williams, 50, the teacher at the center, who is also paid in bitcoin. “But I learned that … it’s not just for white people and billionaires.”

Vivier said the arrangement “future-proofs” the city for when bitcoin recovers and becomes more mainstream. “We keep praying that bitcoin will go back up … (the downturn) is hitting us small businesses hard,” said Vuyisa Sakela, a police officer and convenience store owner, who estimates 20% of his payments are in bitcoin.

Despite the uncertainty, Sakela said the digital payments are safer in the crime-ridden city than cash because it’s harder to steal digital currency, and he’s happy to be at the forefront of financial innovation. ‘BITCOIN FOR FAIRNESS’

Sub-Saharan Africa accounts for just 2% of cryptocurrency transactions globally, but countries such as Nigeria, Kenya and South Africa have developed sophisticated markets that use it for “everyday financial activity,” according to blockchain research firm Chainalysis. It found that African users often aim to avoid money transfer fees, protect their money against high inflation or to make money due to a lack of job opportunities.

Surfing instructor Ndabambi said bank fees often ate into what little he was able to save previously. “Now my dreams for the future are different,” Ndabambi said.

“I want to open a township restaurant where customers can pay with bitcoin.” Elsewhere in Africa, the non-profit organization Bitcoin for Fairness is educating people in countries such as Zambia, Ghana, Zimbabwe and Nigeria about the currency, while a blogger used bitcoin to support people displaced by a volcanic eruption in the Democratic Republic of Congo in May.

Still, roughly three-quarters of crypto users worldwide have lost money, according to an estimate by the Bank for International Settlements (BIS) that highlighted “several boom-bust cycles”. In JCC Camp township, Vivier and Bitcoin Ekasi members said they believed the currency would return.

“Sometimes you crash but you get back up,” said Ndabambi, comparing it to surfing. “Bitcoin will be up again and my plan is to stick with it.”

(This story has not been edited by Devdiscourse staff and is automatically generated from a syndicated feed.)