Ever wondered what country-wide crypto adoption would look like? We decided to look at some of the places that are trying to make it happen.
So, how does it work and what kinds of issues are they trying to solve with crypto? Let’s find out.
More and more countries these days are looking to make crypto their national currency. But why? Well, crypto has a lot to offer – from cheaper transactions to more inclusive financial services.
Crypto is especially appealing to nations with a history of financial instability, or those with limited access to traditional financial products like bank accounts. In emerging markets, crypto represents a viable alternative to their own currencies, which are often falling short as stores of value and means of exchange.
So, which nations are already on board?
Last year, El Salvado famously became the first country in the world to make bitcoin legal tender. President Nayib Bukele’s plan was to help the people of El Salavador benefit from financial technology and get access to bank accounts, since most of them relied on cash. Since bitcoin was in a bull market at the time, he also believed his decision was creating economic opportunities for the nation. Today, the reality looks a little different - the market taking a turn has resulted in Bukele’s investments losing over 50% of their value. He recently announced plans to buy back bonds to allay default concerns.
Argentina also looked to crypto this year as a way to hedge against inflation. With the Argentinian peso depreciating, much of the country’s population is below the poverty line. This has caused many to turn to crypto – especially stablecoins – as a way of storing value in US dollars. Last month, the Economy Minister Martin Guzman announced his resignation, which led to USDT gaining 6.6% against the peso. Argentina now has one of the highest rates of crypto adoption in the world.
Venezula shows support for crypto in a unique way – the country actually created its own state-backed cryptocurrency back in 2018, known as the petro. The currency was designed to help stabilise the nation’s economy, and was backed by reserves of “Venezuelan wealth”, such as oil, gas, gold and diamonds. Today, the country still ranks in the top three in terms of cryptocurrency adoption.
While it clearly can be done, is adopting crypto as a national currency wise? Some see it as a way of sidestepping ongoing regulation of digital money – making crypto an official currency could act as a kind of shortcut. But without standardised regulations across all countries, cross-border transactions could potentially be problematic.
Cryptocurrency’s volatile exchange rate to fiat currency is often cited as a drawback of making it an official currency, since prices could change from one day to the next.
Then there’s the argument that all the while its value is so unrelated to the main economy, crypto is unlikely to be chosen as the main currency in which all prices are quoted anyway, even if it is legal tender. But with increased crypto adoption, this could change.
So, what do you think – do the benefits of crypto outweigh the concerns about widespread adoption?