Whether we’re talking about Internet banking, e-money, or crypto, when it comes to financial inclusion and innovation, there seems to be an assumption that as digital financial services take root in a society, cash automatically becomes redundant.

But apart from a few countries, China included, what we’re actually seeing is that cash-in cash-out networks are essential to a country’s transition from a cash-based economy to a digital one. It’s becoming clear that while there is a definite appetite for digital money, and the benefits it brings in terms of convenience, users need to have the ability to move into digital money, and back out again, via cash.

While the studies we’ve come across focus on e-money, from our own experience we can see a similar need for cash on and off-ramps in the crypto economy.

Why is cash so important?

According to a study by BIS, even though retail payment systems are becoming faster and more convenient, people still gravitate towards cash. The reason, it claims, may have to do with store-of-value motives, rather than payment needs.

Studying the demand for small and large denomination notes across jurisdictions, BIS states that over the last decade, the demand for large denomination notes has outpaced that of smaller denominations, suggesting that cash in increasingly being used as a store-of-value. As such, despite major advances in digital financial services, cash in circulation is not dropping for most countries.

Another study looking at the adoption of mobile money systems in Kenya found that cash-in cash-out agents, where people can conveniently top up their balances or make withdrawals, play a key role. Similar findings were made in other countries across Africa and Asia, citing the reason that cash-in cash-out agents are necessary for people to feel comfortable and get familiar with new forms of money and payments as they transition to new systems.

But it’s not just about familiarity; it’s equally about practicality. While people may get their salaries paid digitally, receive digital remittances, or as merchants accept customers to pay digitally, not all of their expenses can be paid in the same way - and vice versa. Going digital does not happen overnight, but unfolds through a series of stages.

In other words, since digital systems are rarely comprehensive from the outset, people need to be able to have the flexibility to move easily between cash and digital in order to successfully navigate the transition - this seems to be a condition for adoption.

What about cryptocurrency?

For us, the importance of cash in driving the adoption of crypto has been apparent from when we first began. In fact, back in 2014, we facilitated the world’s first cash-in cash-out cross border transaction using Bitcoin. Since then we’ve grown an extensive global network of cash points where people can move in and out of crypto easily using their local currencies.

The point is that when it comes to crypto, we’re simply not yet at a stage of mainstream adoption. We see signs of it; we hear stories that indicate that it may not be long until we see crypto take its rightful place alongside other asset classes.

It’s true that some people already opt for getting their salaries paid in Bitcoin, but such practices are still conditioned on the ability to partially cash out in order to settle permanent outgoings such as rent. Yes, some service providers do already enable people to settle their bills using crypto, but in this case, the need to be able to cash out also has to do with the volatility of conventional crypto assets.

Fiat to crypto on- and off-ramps also remain important for crypto traders. While some exchanges do enable users to deposit and withdraw using credit cards, many crypto-to-crypto exchanges offer no such possibility which is often due to regulatory difficulties.

Lastly, another important reason why these on- and off-ramps are vital is the fact that large pockets of the world’s population are unbanked. For these communities moving in and out of crypto can only be done via cash.

Bitspark’s cash-in cash-out system

With Bitspark, we’ve addressed these needs in two ways: cash points and stablecoins.

Cash points are merchants, agents, individuals or even restaurants where Bitspark users can go to in order to exchange cash for crypto, and vice versa. In Hong Kong, for larger amounts of cash, it’s also possible to arrange an armoured pick-up or delivery to ensure a safe exchange.

Stablecoins are key to this system. While already offering stablecoins that are pegged to the value of local currencies such as the US dollar, Euro, Philippine Peso, Hong Kong dollar, and others, we eventually want to see stablecoins for each of the world’s 180+ fiat currencies.

Stablecoins are important because they simplify the process of trading local cash for crypto, but also because, unlike Bitcoin, stablecoins are not so volatile. In practice, it means that once you’ve exchanged your cash for stablecoins, you can easily move into other cryptocurrencies, or convert to another local currency stablecoin, send money abroad, or spread your risk to preserve your wealth.

This also works the other way around: When you want to pocket the profits you’ve made on your favourite exchange, or if you receive crypto from relatives abroad, simply withdraw your crypto in your Bitspark account, convert the funds to your local stablecoin and cash-out.

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