The adoption of cryptocurrencies in underdeveloped countries in comparison to Europe

Posted by Global Technology Interface on February 04, 2022

Cryptocurrencies have amassed huge amounts of attention during the last few years. The attracted attention and high volatility in the crypto market might have also been the reason for many investors in cryptocurrency, to accumulate millions and even billions of dollars in a matter of few months. From billionaire's tweets about the coins sending people on social media into a frenzy to central banks weighing down with huge bans, cryptocurrencies have been under the spotlight in the whole financial world for quite some time now and will continue to be, it seems like.


The world of crypto coins does not only attract interest due to its volatile nature and high yields of return but also because of the ideology that it supports. Back in December 2013, Alan Feuer, a news analyst from The New York Times, had labelled the venture of bitcoin as more of an "ideological undertaking", rather than financial. The initial bitcoin investors did not see the cryptocurrency merely as an investment opportunity, but a way to separate state and money, since they trust in ordinary financial currencies and the institutions that support and regulate them has been deteriorating for a long time.


Financial specialists have been looking into developing countries that are on the way to integrating the cryptocurrency system into their economies. The rate of adoption of cryptocurrencies in countries like Vietnam, Kenya, Nigeria, Venezuela, India, and Pakistan is much higher than in countries in Europe for example. Underdeveloped countries like the abovementioned, have plenty of reasons for the desire to strive away from central banks and traditional currencies. One example of why traditional payments is undesirable in countries like Kenya is the high processing fees that they get from banks and wire-transfer companies like Western Union. Last year, Kenyans were sent $3.1 billion as financial support, from family members or friends from abroad, which has resulted in them paying roughly $240 million in fees, according to World Bank.




The global rate of adoption has jumped by 880% this past year and the world has also witnessed the first country to officially adopt bitcoin as a legal tender. On June 5th 2021, the country of El Salvador, through its President Nayib Bukele, has made bitcoin a legal tender alongside the US dollar. Now Salvadorans can use cryptocurrency to settle debts with the banks, buy goods and services anywhere in the country and do not have to pay taxes if BTC rises.




But how is the new, decentralized model of cryptocurrency addoption affecting the Old Continent - Europe, where the central banks have a tight grip on the economy. Interestingly enough, the eastern part of Europe has been the leader in terms of cryptocurrency usage and adoption, with Ukraine and Russia, far ahead of their competition. Ukraine, a country with yearlong internal turmoil and economic disbalance, has announced recently that it has passed a new law that legalizes and regulates bitcoin and other cryptocurrencies in a nearly unanimous vote. 


Until a year ago, the Russian Federation was also positioned against cryptocurrencies, however, since then a lot has changed, and Russia has made the usage of some cryptocurrencies legal. This June, Russia's central bank governor, Elvira Nabiullina stated for CNBC that the future of financial systems is digital. As commerce moves online, a gap has appeared, for fast and cheap payment systems, which she believes could be filled by the central bank's digital currencies. Central bank digital currency, however, is something completely different from bitcoin's decentralized model. As China has done already, Russia wants to follow up and create their digital Ruble by the end of 2021, moreover, the European Central Bank - ECB had also announced plans for the creation of the digital Euro.


This news is very alarming for the fans of cryptocurrencies in Europe and does not at all align with their expectations of a decentralized financial system, as the plans which European central banks have announced are for the adoption of digital currencies, regulated by government institutions.



In a recent interview for Bloomberg TV, released on the 15th of September, the President of ECB - Christine Lagarde shared her opinion on bitcoin and cryptocurrencies. She stated: "Cryptos are not currencies. Full stop, Cryptos are highly speculative assets that claim their fame as currency, possibly, but they're not. They are not.". Some key takeaways can be made from this interview. The ECB are certainly not denying that digital currencies are the future, and they are eager to get on the trend, however, the most important takeaway here is that they need to be regulated, according to them. So, in economic terms, the CBDC - central bank digital currencies, will not differ in any way from the current central bank currencies, except for the way they are carried.


The second takeaway is vital for the understanding of the situation in which central banks are currently at. Central banks have been a big part of the greater economic picture for decades and even centuries and now Satoshi Nakamoto's creation has given them a reason for doubting the future. Although central banks are important for the overall economic stability, they are on the back foot as they have failed to provide it numerous times in the past. One such case had led to the very creation of bitcoin. The cryptocurrency was created as a direct response to the bailouts given to banks, which had caused the 2008 crisis. Corporations can no longer behave recklessly and be saved by a friendly central bank, which is there for the rescue and the pardon of debt.


Ultimately, major changes are about to be unveiled in the upcoming years, will the average citizen keep paying for the mistakes made by the people on top? Will the regular people decide to take on the risk and embark on a whole new adventurous ride that cryptocurrencies offer, supported by no major financial organizations but the public itself? Is there a world in which decentralized cryptocurrencies are the only currency and governments protect the individuals rather than the corporations?

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