Kim Grauer, director of research at Chainalysis believes that developing countries offer a “massive amount of entrepreneurial opportunity” for crypto companies. This comes shortly after El Salvador has made Bitcoin legal tender.
It seems that developing countries around the world are providing fertile ground for cryptocurrency, as digital finance builds deep roots in some of the world’s poorest areas. Vietnam currently has the world’s highest rate of crypto adoption, with individuals and businesses investing, trading and transacting large amounts of Bitcoin.
In more advanced economies, cryptocurrencies are viewed with suspicion. Many people do not trust the completely digital management of the coins and others have fallen for scams, which bolster the reputation of cryptocurrency. Regulators in the US and Europe have issued warnings over trading crypto and this unreliable reputation makes it difficult for networks to reap the same success in advanced economies as they can do in developing countries.
The signs that crypto is building roots can be seen in countries that have a history of financial instability or where access to traditional financial tools, such as bank accounts, is difficult. In these countries, the use of cryptocurrencies is fast becoming everyday normality.
You may find freelancers in Nigeria receiving payment in Bitcoin or medical professionals in Brazil placing their savings into an exchange-traded fund.
Chainalysis has ranked Vietnam as the number 1 for crypto adoption worldwide. The country is one of 19 frontier and emerging markets in its top 2, with the US being the only advanced economy on the list at number 8.
Separate data from Usefultulips.org that tracks Bitcoin transactions on the world’s two biggest trading platforms show that over the last few weeks, sub-Saharan Africa has taken over North America and has become the geographical region with the largest volume of this kind of crypto activity.
Some people, including the Central Bank of Nigeria, are concerned that inexperienced investors could lose their savings gambling on highly speculative cryptocurrencies. The legalisation of Bitcoin as legal tender in El Salvador faced its own criticism. According to Paul Dojman, co-author of Chain Reaction: How Blockchain Will Transform The Developing World, “It changes the position of bitcoin in the [global financial] system and it accelerates the whole debate about digital currencies.”
Crypto offers an alternative to weak currencies
Developing countries offer a fertile ground for crypto most often because their own currencies are ineffective. The national currencies in many developing countries often fall short as they fail to hold value, act as a means of exchange or as a unit of account. The currencies are also prone to unpredictable inflation, fast-moving exchange rates, inconvenient banking systems, financial restrictions and unreliability due to threats to capital control.
By many who live in these developing economies, cryptocurrencies are seen as a much more reliable option. The value of Bitcoin remains the same in every country and exchanges such as Binance and Coinbase don’t face the same threats that Capitals do. These two exchanges dominate the developing world despite warnings that traders could lose all of their money.
Could cryptocurrencies transform the developing world? Over the next year, observers will be watching to see if any other countries follow the footsteps of El Salvador and make crypto legal tender.
