Despite Widespread Rollout, Slovenians Remain Sceptical About Crypto – POLITICO

by Arthur · September 11, 2022

LJUBLJANA — The souvenir shop at Slovenia’s highest mountain pass in the Alps offers the usual selection of postcards and tourist fiction. But there’s a twist: You can also pay with Bitcoin if regular cash is too boring.

The wooden kiosk in the Vršič Pass, where tourists stop for a stunning landscape and flocks of sheep fighting for cover from the scorching sun, is just one example among the thousands of shops and venues in this small European country that allow customers to pay with virtual currencies. You can find crypto anywhere, whether it’s pet food stores, toy and clothing stores, or bars and hotels. Commercials talking about crypto startups blow on the radio on sweaty summer days.

It’s all part of a vibrant Slovenian crypto startup scene, which is trying to offend the financial market and tinker with new blockchain technology in hopes of making it big in an unfettered global industry.

There’s just one big catch: ordinary Slovenians still prefer old-fashioned fiat money to make payments — and they’re shying away from digital currencies because of concerns about their valuation and, more generally, the drip of revelations about crypto-Ponzi schemes.

Although companies say they expect their customers to turn to crypto as a means of payment in the next two years, market research in a report by consulting firm Deloitte suggests that it remains difficult to integrate cryptocurrency with existing financial infrastructure and across other digital currencies. The report also points to companies’ fears about the security of payment platforms.

In another recent paper, ratings agency S&P Global similarly found that most of the crypto market is currently about speculation, not payments.

This tension reflects the broader dilemma for crypto: Is it meant to be an investment or a currency? If it’s the former, those with an appetite for risk can buy or sell it as an asset that often fluctuates wildly. If the latter, there is a whole host of issues regarding regulation and oversight that policymakers still need to figure out.

Take, for example, the question of who bears the currency risk, the shop owner or the customers? For now, it’s the latter – and their reluctance to go all in on crypto is one reason why there’s still little appetite to use it as a means of payment.

That said, some traditional payment giants, such as Mastercard and Visa, have moved into the space, confident that crypto payments will become mainstream. Through partnerships with crypto networks, both companies now sell crypto payment cards that work on their regular networks. Other major brands, such as Gucci, Starbucks and Microsoft, have also jumped on board, sparking enthusiasm.

“With increased maturity and regulation of the industry, we see crypto assets becoming increasingly relevant to wider segments of Europeans, beyond what we would call ‘early adopters’ or ‘digital natives’,” said Christian Rau, senior vice president of crypto and fintech enablement .with Mastercard Europe.

An innovation in Slovenia is Ljubljana-based GoCrypto, which allows businesses to set prices and receive money in euros, protecting them from a highly volatile market while allowing customers to pay with over 50 cryptocurrencies. Shopkeepers work with a GoCrypto sales terminal that takes in the amount of a cryptocurrency for a set euro price, while customers scan a QR code that takes some of the cryptocurrency from their digital wallets, where they keep their money. For merchants, that means avoiding debit and credit card processing fees.

But for now, few customers ask to pay in that way. According to GoCrypto, crypto payments represent about 3 percent of all transactions on their systems. But even though the share is small, it still comes from a big jump year-on-year – 883 percent between 2020 and 2021.

Buzzing startup scene

“Everyone has touched crypto in Slovenia, hairdressers, postmen, every single table is discussing crypto,” said Miha Vidmar, product manager at Bitstamp, a global exchange platform that trades between fiat and cryptocurrency. It started early in the country, in 2011.

Tanja Bivic Plankar, the president of the non-profit group Blockchain Alliance Europe, agrees that the country was a “very early” adapter of crypto around that time.

Crypto and blockchain technology – an online and public ledger that records transactions across a network of computers, making it nearly impossible to alter or hack — soon attracted Slovenian computer engineers and entrepreneurs who built their startups while looking to raise money.

As Bivic Plankar sees it, this innovation helped young firms rise quickly from nothing. “As a former socialist country, we don’t have a long tradition of angel investors and venture capital for startups,” she said.

After a few initial global successes with companies like Bitstamp, a wave of initial coin offerings—fundraising campaigns in which companies create and sell cryptocoins to early backers of fiat currencies—started a crypto-startup boom in 2016.

“We’re a small country, and everyone gossips,” Vidmar said. “So when these 22- and 23-year-old guys built a global crypto exchange and made millions, it sparked interest.” These success stories include GoCrypto, which now operates in 69 countries and makes money from fees for crypto sales terminals as well as from conventional payments from its parent company Elly and other transactions.

Niche market

For now, there is still a small minority of Europeans who actually hold digital currencies. Only 17 percent owned any crypto in 2021 – and 40 percent of them made their first crypto purchase that year, according to a survey by crypto platform Gemini.

In BTC City outside Ljubljana, one of the largest shopping centers in Europe with over 500 stores, a woman pulls out several bills in exchange for a children’s building set in a toy store. That brought a smile from the cashier, who noted that he rarely sees crypto payments. “People pay with bills or credit cards,” he said. “They want something simple.”

This sentiment was echoed in an informal survey of seven store managers in Ljubljana, who also said that crypto payments are rare.

“It’s so hard for us Europeans and Americans to adopt the phone as a payment tool, because we love cards,” said Dejan Roljic, founder and CEO of GoCrypto.

Even Bivic Plankar admits that most Slovenians “still see crypto as an investment and not as a means of payment.”

But there are also those like Iris Jeraj, who owns a busy clothing store in Ljubljana, who take a more bullish view. She started offering crypto payment as an option for transactions in 2018 and is sticking to her strategy.

“This is the future, and over time, this is what customers want,” she said.