Would cryptocurrencies do well in Honduras?

La criptomoneda en Honduras tiene un futuro incierto

Cryptocurrencies are gaining traction in a number of countries including El Salvador, which recently authorized its use as legal tender. Economist Julio Raudales says that short-term adoption in Honduras is unlikely because the country “does not have the [necessary] financial or political conditions.”

By Laura García

A group of U.S. investors traveled to Honduras in late August to explore public and government interest in the world of cryptocurrency. The investors issued a press release prior to their arrival informing the Honduran media that they intended to discuss “how Bitcoin and other cryptocurrencies could help Hondurans achieve financial stability and gain wealth.”

Led by Brock Pierce, billionaire, and chairperson of the now dissolved Bitcoin Foundation, met with President Juan Orlando Hernández to discuss the future of cryptocurrency in Honduras. Pierce, a self-described philanthropist, also visited a pediatric hospital (Hospital María de Especialidades Pediátricas) in Tegucigalpa to donate disinfectants.

Brock Pierce was born in 1980 in Minnesota, USA. A child actor, he retired from acting as a teenager to embark upon a new career in business and finance. In a 2018 issue of Forbes magazine, Pierce was named in a list of the wealthiest people in cryptocurrency, with an estimated net worth then of US$700 million to US$1.1 billion.

In Honduras, Pierce and his wife, Crystal Rose, led a group of ten that met with Eldad Golan Rosenberg, Israel’s newly appointed ambassador to Honduras. The group included Rabbi Yosef Garmon, founder of the Israel Humanitarian Coalition, and Honduran Foreign Minister Lisandro Rosales.

Yaakov Flitchkin, another member of the delegation that visited Honduras, is a Jewish community activist in Brooklyn, New York who commended President Hernandez “for his support of the State of Israel and his decision to move the Embassy of Honduras to Jerusalem” in a tweet at the end of visit.

Last June, Honduras became one of the few countries that moved its embassy in Israel from Tel Aviv to Jerusalem. The only other countries that officially moved their embassies are the United States, Guatemala and Kosovo. The Palestinian militant group Hamas condemned the move of the Honduran embassy as a violation of international law. Palestinian Foreign Minister Riyad Al-Maliki also issued a statement declaring that, “It is very regrettable that the president of Honduras has decided to take the wrong side of history and proceed with this hostile move against the Palestinian people.”

Gauging public support for cryptocurrencies

Pierce, the self-styled “crypto-pioneer” and former actor, starred in several Disney productions as a child, including The Mighty Ducks and First Kid. Pierce and his group traveled to Honduras to gauge interest in opening up the market to cryptocurrency. Known as the “delegation of Bitcoin ambassadors,” this is the same group that Salvadoran President Nayib Bukele invited in June to promote cryptocurrency use in El Salvador. Milena Mayorga, El Salvador’s ambassador to the United States, hosted the delegation on that occasion.

In an August 23 press conference in Tegucigalpa, Pierce said, “Honduras has a lot of potential.” However, he was quick to point out that he wasn’t in Honduras to “sell anything,” but simply wanted to learn about the Honduran public’s confidence in making cryptocurrency investments. Through an interpreter, Pierce clarified that they did not bring any specific investment plans or proposals to President Hernández, whom he met later that day.

“Currencies are all about confidence. A cocoa bean can be a currency if people are confident that it is a reliable currency,” says Julio Raudales, a Honduran economist.

Pierce ran as an independent presidential candidate in the 2020 U.S. elections, and co-founded Tether in 2014 with Reeve Collins and Craig Sellars. This company created an eponymous cryptocurrency, also known as USDT, a synthetic digital dollar. At its inception, Tether claimed that USDT was a stable-value cryptocurrency that mirrored the price of the U.S. dollar because it was backed by financial reserves equal in USD value to the number of USDT in circulation.

A 2020 investigation by the New York State Attorney General proved that wrong, revealing that Tether concealed US$850 million in losses. “Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines,” said Attorney General Leitia James in a February 2021 press release.

James continued her efforts “to protect investors from fraudulent and deceptive virtual or ‘crypto’ currency trading platforms by requiring Bitfinex and Tether to end all trading activity with New Yorkers,” and pay US$18.5 million in penalties.

The outlook in Honduras

Marco Amaya is the CEO of Trade Corporation Capital in Honduras, a virtual learning center that specializes in cryptocurrency and stock market education. In an interview with Contracorriente, Amaya said Honduras is very different from El Salvador in that the latter nation had already abandoned its national currency to use the U.S. dollar, while Honduras still uses its national currency, the lempira.

“Before adopting a cryptocurrency as legal tender, Honduras would first have to undertake a dollarization process. Therefore, a move to cryptocurrency isn’t feasible in the near term,” said Amaya. He also believes that the Honduran public needs to be better educated on how equity markets work, including stock exchanges, stockbrokers, equity issuers and investors.

Julio Raudales, an economist, sociologist and the vice-rector for public relations at the National Autonomous University of Honduras (Universidad Nacional Autónoma de Honduras – UNAH), predicts that Brock Pierce’s visit to Honduras “may spark interest by Hondurans in investing in cryptocurrency.” 

Raudales says, “A sizable number of Honduras are not willing to invest in physical assets and prefer financial assets,” so investment opportunities in cryptocurrencies may appeal to them. But he stressed that Honduras needs to lay the groundwork before it tries to bring in cryptocurrency. Raudales notes that the current presidential candidates do not seem to have “much interest” in a cryptocurrency policy if they win office.

It is easier to launder money using cryptocurrencies because there is no central entity such as the Central Bank of Honduras (BCH) to monitor and control cryptocurrency markets. However, according to Raudales, any currency can be used for money laundering. “Not many people have the capability to trace bitcoin investments. It’s easier for prosecutors to trace investments in real estate, for example,” says Raudales.

Since the Chapter V, Article 23 of the law for Employment and Economic Development Zones (Zonas de Empleo y Desarrollo Económico – ZEDE) allows a ZEDE to establish an independent financial regime, the Prosperous ZEDE recently announced a cryptocurrency adoption that includes Bitcoin. One Bitcoin is currently worth about US$47,760 or 1.14 million lempiras.

Read: A Micronation for Sale in Roatan 

On June 8, the Salvadoran Legislative Assembly overwhelmingly approved the Bitcoin Law, making El Salvador the first country in the world to make Bitcoin legal tender. In the Assembly’s debate on this law, opposition legislator Johnny Wright Sol asked, “How will this currency’s volatility be addressed?” 

Leonor Selva, executive director of the National Private Enterprise Association (Asociación Nacional de la Empresa Privada – ANEP), also spoke out against the approval of the cryptocurrency as legal tender. She denounced the deal with Strike (a crypto payments processor that developed the wallet app to be implemented in El Salvador), and turning BANADESA, the Salvador development bank, into a Bitcoin exchange house as nothing but “sweet business deals.”

In his press conference, Brock Pierce urged the news media to compare Honduras to Dubai or El Salvador, suggesting that the government could emulate El Salvador, “which will give every adult US$30 [in Bitcoin] to invest.” However, in Honduras, Julio Raudales does not believe “that people are ready to take on the risks posed by Bitcoins.”

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