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Palm tree dotted beaches packed with sun-tanned surfers, camera-holding tourists leisurely strolling around emerald green rice terraces, majestic temples basking in breathtaking sunsets — this is what comes to mind when people think of Bali: Island of Hindu Gods and paradise for soulful journeys.

Amid all this apparent tropical bliss, one would be pleasantly surprised to discover a vibrant bitcoin economy quietly taking place alongside the booming tourism industry and tech community; or perhaps, a byproduct of it.

From Island of Gods to Bitcoin Paradise

Bali first became an international bitcoin sensation in 2014 when an anonymous buyer from Texas bought a luxury villa with over 800 bitcoins, which was worth more than US$500,000 at the time. While the purchase presented a perfect example for the idiosyncrasies of bitcoin adoption, usage of bitcoin in Bali is not limited to luxury items — in fact, they permeate the everyday life of inbound tourists.

According to the latest stats on coinmap.org — a web-based heatmap that records merchants that accept bitcoin for payments —there are a total of 42 merchant in Bali accepting bitcoin, most of them concentrated in Ubud and Denpasar.

Both areas are popular tourist destinations that see hundreds of hotels and F&B establishments etc. catered to international visitors. Ubud – a small town to some 30,000 residents in the heart of Bali island – is home to 23 merchants that accept bitcoin. This per capita adoption density is greater than that of London or Manhattan.

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According to Coinmap.org, there are total of 42 merchants accepting Bitcoin in Bali

In addition to the rapidfire rise in popularity of the digital payment method in Bali, there is also organized effort from Bitcoin.co.id — Indonesia’s largest bitcoin exchange — to push for bitcoin as a preferred currency over cash.

Also Read: Juniper Report: Bitcoin’s value soars following Brexit and weak Chinese economy

Bitcoin ATMs are sprouting up around the island which enable consumers with a digital wallet to sell bitcoin for cash, and bitcoin exchange offices allows holders of bitcoin to convert it to Rupiah at a rather preferable market exchange rate.

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Bitcoin enthusiast and frequent Bali visitor Eddy Azar at the newly established Bitcoin exchange in central Ubud to convert bitcoin into rupiah. The process takes about 5 min with the help of well-trained staff. Photo by Lucia Wang.

What we’ve seen happened so far is only scratching the surface of the wider movement. Led by the people behind Bitcoin.co.id (Bitcoin Indonesia), an initiative Bitisland started two years ago works in conjuction with Bitbayar and consensusReality.io to provide merchant-facing bitcoin payment solutions. This ambitious project aims at onboarding all types of local businesses to accept bitcoin, including spas, hotels, restaurants, transportation and travel agencies.

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According to Coinmap.org, there are total of 3 bitcoin ATMs installed in Bali

More grassroot movements aimed at educating local communities such as Bitcoins in Bali are also gaining strong foothold.  Gary Dykstra, who spearheaded Bitcoins in Bali with Stephen Demeulenaere, hosts weekly roundtable meetups and Bitcoin 101 Workshops at Hubud, a prominent co-working space in Ubud Bali.

Bitcoin meetups see steady stream of bitcoin experts and affectionados coming in to discuss issues around the latest news and price movement of Bitcoin, whereas Workshops offer fundamental knowledge and how-tos for the actual usage of digital wallets and ATMs.

According to BitBayar statistics there are 1,035 merchants in Indonesia accepting bitcoin through BitBayar alone, not counting other tech providers. The Bitcoin Paradise dream might very well become a reality soon.

A Banking Haven for the Unbanked

Living off of bitcoin in Bali is not just a fantasy. There is living proof one can not just survive but actually thrive on bitcoin in Ubud where there is enough support for the alternative.

Anton, who wishes to keep his last name anonymous, is a British/Australian nomad and a passionate advocate for peer-to-peer social banking model. He began his unbanked adventures two years ago, when he transferred the entirety of his fiat accounts into Bitcoin.

Today, he can start his day with a coffee at Kismet, a hip local restaurant that provides fast WIFI, and exquisite vegetarian food. Or, he may decide to go to Seniman coffee studio where he can get the best brewed coffee in town; all by paying with bitcoin. He was even able to pay his apartment and motorbike rent in bitcoin after having taught his landlord how to use it.

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Bitcoin ATM in HUBUD, a coworking space in Ubud, where anyone can walk up to it and start selling bitcoin for cash. Photo courtesy of HUBUD.org

Anton’s story did not all happen overnight — at first Anton would carry some half of his bitcoin worth in cash but overtime he realized there is enough demand for bitcoin to be fulfilled simply by education or persuasion: Anton would teach people new to bitcoin how to use and sell as well as how to trade bitcoin with other experts.

This method of living means I never have to interact with ATMs.” says Anton, “All the banked are constantly paying for those ATMs in hidden fees, even if they do not realize it. I much prefer interacting with a human being: have a chat, trade some crypto.

The yearning to bring back a peer-to-peer social barter economy is echoed widely among the bitcoin enthusiasts in the Ubud community.

Stephen DeMeulenaere, a long time expat in Bali, founded coinacademy.co, an online literacy program for digital currency and Connectivize, a platform that promotes exchange of services with tokens other than cash.

What he calls ‘reciprocal currency’ include Hours, measured by time, and Luvz, a token of appreciation. According to the mission statement, the platform is created to encourage giving and receiving in equal measure in a way that “change the way we relate to other people, and how we value everything”.

DeMeulenaere first came to work with Credit Unions in Thailand and Indonesia during the 1997 Asian financial crisis.

In order to build local currency systems, he helped printing currencies that made up for the lack of Thai Baht and Indonesian Rupiah in rural areas.

What he saw as a result of the Southeast Asian financial crisis was a loss of faith among the public in central banks. Having their deposits being taken away by banks during the monetary crisis, many locals in Bali opted-out of bank accounts.

Of course, there are a vast amount of low income households who do not even think about putting savings in the bank. All things considered, Indonesia has close to 200 million unbanked population — that is a deep well of financial pain.

Gary Dykstra also saw this largely unbanked population as an opportunity to experiment with digital alternative. Now a pillar of the local bitcoin community, Dykstra came to Ubud in 2014 to start the Bitcoin in Bali community. Having worked in the ‘card not present’ payment processing technology in the US, Gary witnessed a fair amount of wastage and lack of innovation.

“In fact, the  [payment] industry often profited from NOT innovating,” he says.

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Bitcoin enthusiast and frequent Bali visitor Eddy Azar at the newly established Bitcoin exchange in central Ubud to convert bitcoin into rupiah. The process takes about 5 min with the help of well-trained staff. Photo by Lucia Wang.

When Dykstra came across Bitcoin, a whole world of potentials opened up.

“It was a bit like working for a big phone company and then learning about Skype,” he says.

After visiting Bali, he decided it was a perfect location to see if Bitcoin could work as money: the island is big enough to have constant influx of international tourists with bitcoins to spend, small and nimble enough to innovate, enough pain in FIAT based payment, and the Bank of Indonesia is dovish with regulation.

Dykstra later realized bitcoin has much more potential for social change beyond payment — he observed how widely accessible mobile data is, and that many people have a mobile phone before they get a bank account.

“Perhaps they will never need a bank account to participate in the new world that is possible with crypto currencies.”

Technology Leapfrog Beyond Silicon Bali

It is not just coincidence that bitcoin entrepreneurs congregate and flourish in Bali — Bali as a bitcoin destination almost feels fated for a combination of reasons.

First off, for an island that sees inbound tourists rising from 2 million in 2008 to 4 million in 2015 there are an ever increasing need for a universal currency that saves multinational tourists from converting to Rupiah, whose exchange rate fluctuates wildly almost on a daily basis.

Also Read: The banks of the future – How Bitcoin will help shape the future of finance

Adopting a digital wallet where foreign currencies are converted at fair exchange rate, does not go up and down too much in value, and is safe from pickpockets makes a lot of financial sense.

“People lose their wallet and phone when traveling because of many reasons – forgetting them, dropping them, pocket thieves”, says Oscar Darmawan, founder & CEO of Bitcoin Indonesia.

“With bitcoin, you can easily backup your digital wallet and restore it,” he says. 

In fact, according to DeMeulenaere, inbound tourists from Western countries hold bitcoin and prefer it over cash when they arrive in Bali. Not having to carry stashes of cash is one advantage, low transaction fee is another.

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Clear Cafe, a well-know local cafe and restaurant, can only accept cash payments. Such businesses are in the majority in Bali. Photo by Lucia Wang

Additionally, setting up credit card payment does not come easy for Balinese businesses. Bitcoin fills the gap between cash-based small businesses and credit-card-ready establishments.

Dykstra points out that some merchants like to appeal to expats and techies so adopting bitcoin payment is a way to stand out. He has worked with progressive expat business owners who offer bitcoin as a way of differentiation.

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Bali Bohemia, a vibrant bar & restaurant frequented by expats and tourists alike in Ubud, recently started extending a discount for those who pay in bitcoin.Photo by Lucia Wang

Some historical reasons might have contributed to the fast adoption of Bitcoin.

For starters, the global financial crisis led to a widely shared public distrust of central banks. Top that with the continuous depreciation of Rupiah against the Dollar and any sensible Balinese will find it hard to believe in that their national currency is investment-worthy as its value goes down over time.

What is more interesting is Bali’s history with alternative coins — the Balinese have a history of integrating foreign money into their daily lives.

There was Uang Kepeng, a form of ancient Chinese brass coin that made its way to Indonesia back in the Tang dynasty through trade. Kepeng was used by Balinese in their day-to-day lives up until 1970; people used it to buy household essentials at marketplaces and snacks at school.

There was also the large inflow of Dutch Indies money during the colonial era in Bali, when a new land revenue system was introduced that demanded peasants to pay taxes in Dutch Indie money rather than Balinese currency.

What really accelerates the giant leapfrog is mobile technology.

In a country consisting of 18,307 islands, Indonesia has always had challenges deploying internet access. But telecom service have historically been relatively accessible.

As a result, Indonesia’s Mobile phone penetration far surpass that of the internet. As of 2015, Indonesia has about 330 million mobile subscribers — out of which 43 per cent are smartphone users — compared to 93 million internet users.

When you put the vast underserved, unbanked population to a highly technology savvy mobile users, a mobile-ready technology like bitcoin wallet seems inevitable to take off — aided, in part, by a backwards, too-slow-to-innovate traditional banking system.

Also Read: Bitcoin gets legal protection in China

True financial inclusion means so much more than having a bank account.

For some, advocating usage of bitcoin is to strive for individual financial freedom that is independent from central bank control.

“I believe the right to create our own money should be a fundamental human right that all human beings have access to,” says Anton, who is a believer in the sharing economy. “Crypto currency holds the key to making this a reality”.

With the recent impact of Brexit (exacerbating the already volatile currency valuations), Bitcoin has gained more price momentum and consumer confidence in the post-Brexit world.

But will a revolutionary shift happen anytime soon to replace legacy banking system?

Even the most avid Bali bitcoin enthusiasts hold a rather conservative view. “The incumbent system is very entrenched”, says Dykstra, “It not go away until people experience enough pain in the old system.”  

DeMeulenaere also stressed that at the end of day, all goods and services are priced in Rupiah, and that the bitcoin economy they are promoting locally does not aspire to overhaul the FIAT system; rather, they seek to interoperate with the existing system to serve different demographics and purposes.

At the very least, bitcoin will push traditional banks to improve their services and offerings to customer.

What is your outlook on bitcoin and a future for decentralized economy? What needs to happen for it to become a reality? Comment on the article below.

Featured image courtesy of Pixabay. Internal photos attributed in caption.