As the cryptocurrency slowly gains traction across technological avenues and into the general population questions crop up about how Bitcoin can be used in marketplaces where traditional currency has been struggling. Locales such as Africa have poor central banking and little support for easy transactions, but with the prevalence of mobile networks and Internet penetration they’re subtly excellent places for digital currencies such as Bitcoin. The same could go for India, which although it has a small Internet penetration, also has a massive population and a lot of mobile.

The United States is currently on the forefront of attempting to understand the impact and use of virtual currencies—as a result regulators have been taking a magnifying glass to Bitcoin and other currencies. In this environment, shaking up an understanding of what it means to transact with a virtual currency, businesses that once traded liberally with the currency are backing off until the environment settles down.

As a result, Tradehill and the Internet Credit Union have set down the Bitcoin basked and backed away. The question is: who will step up to take their place and weather the potential regulatory storm?

Bitcoin in Kenya and India: An atmosphere for adoption, currency change

Across the world there are communities that lack functional central banking systems but have a surprising connectivity to the Internet and local networks—in fact in Africa and India, function phones are common and mobile payments are a usual system for making transactions. As a result, we’ve discussed before that Bitcoin could have a foothold in Africa with a fertile ground to make these trades work better.

So when I came across an article talking about Kenya and Bitcoin, it fit the thoughts already laid out on the subject.

The article “Kenya: Are Bitcoins the Future of Mobile Money?” describes how BTC is present and there’s a vast mobile economy, but the cryptocurrency just hasn’t caught on yet. It mentions M-Pesa, a mobile payment system launched by Safaricom, seeks to grab a piece of the mobile-payment pie in the country which makes up over 31% of the country’s GDP. While joining into mobile payments went well for Safaricom and M-Pesa, it also attracted the attention of regulators who sought to tax it—bringing about an increase in the fees associated.

In response, Kipochi—visited in an earlier Bitcoin Weekly—arose to allow the use of BTC transactions across mobile-payment and it’s been in working its way slowly into the economy. The company only emerged about two months ago, so it’s too early to tell how well it’s doing.

In India, The Genesis Block published an article about the market for BTC in that country, citing the falling value of the rupee, deficits, and a dipping economy as a potential inroad for a new (more global) currency. Since May, the Indian rupee has fallen almost 24% against the US dollar, imports are down, and deficit is up—all of this may tend to lead to a difficulty moving money in and out of the country.

As for some speedbumps, India has a very slow Internet adoption rate with only 12.6% of the population having Internet access—as necessary precursor to using a digital cryptocurrency is some sort of network access to use the Blockchain (Internet or ad hoc via mobile.) However, it’s noted that India simply also has a colossal population and a large market with a 71% mobile phone penetration at approximately 900 million total users.

Once again, mobile-payments and bitcoin could be the hand-in-hand killer app that makes economics easier for regions that have less access to the Internet and banks and do much of their payments from their phones. As BTC technologies emerge like Coinapult that allow BTC transactions over SMS, or simply a greater smartphone penetration may lead to the impact needed to make bitcoin a viable currency in India.

In the United States Tradehill and others closing down Bitcoin trading over regulation

It’s hard to say where this is going, but regulatory measures and Bitcoin are currently going head-to-head in the United States with the attentions of New York City and federal regulators. As a result, businesses that want to deal with BTC are starting to feel wary of not knowing where they stand or how the government will treat them.

Recently, there’s been a spate of businesses in the US who have looked at this instability and backed away. Amongst them, Tradehill has suspended the exchange of BTC indefinitely in the wake of expectations that the federal government might be looking into trade practices.

“We have recently made the decision to temporarily suspend trading on the Tradehill platform, due to banking and regulatory issues. This decision has not been made lightly and we regret having to take such action,” the company said on its website. “However, we embrace the silver lining of our situation and plan to take this opportunity to upgrade, improve, and polish our trading platform.”

Following Tradehill, the Bitcoin-friendly Internet Credit Union (IAFCU) abruptly dropped all of its bitcoin-related clients and suspended all transactions with them in light of the regulatory instability.

“Starting three months ago we have enjoyed serving some individuals and companies involved in bitcoin that are within our field of membership,” wrote IAFCU CEO Jordan Modell in a blog post. “While exciting, this has also been during a period of increased interest from the press, regulators, and other financial services entities that make up the financial community.   In doing this, certain operational and regulatory issues came up including some that apply to new credit unions like ours.”

Citing regulatory confusion, he added: “Our credit union has worked within the evolving regulatory environment, which has not always been easy.   This is a long not a short road and sometimes with detours.  Until we have further clarity, we are unable to service some of our corporate members.”

Tradehill will barely be noticed by its passage at this time

As cited in the article about Tradehill quitting the Bitcoin sphere due to regulation (alongside IAFCU) it’s hardly been noticed in the marketplace for a quite some time now and there’s new exchanges cropping up all the time. Worse, Tradehill has come-and-gone from the BTC trading circuit so many times that it’s hard to say they’ve had any impact on the general landscape at all.

“Inconsequential, in the grand scheme of things,” says Mark Hopkins, founding editor of SiliconANGLE. “They’ve been such a low volume market for a while that they’re not even publicly indexed by the market chart-makers. This will have little to no effect on the overall BTC market other than to increase volume on other exchanges.”

The Bitcoin market still has a great deal of room to grow into and new exchanges are noticed on the Bitcoin Weekly column literally every week. The current US regulatory curiosity that will make businesses wonder (and this is a problem) but in the end where regulations are well known and not a burden will allow BTC to flourish and.

While that may still be in the air, we can expect that businesses who aren’t dedicated to being part of the Bitcoin market to fall by the wayside.

[Editor’s note: Added segment to talk about the effect of Tradehill’s withdrawal and regulation in general.]