Bitcoin – and cryptocurrencies in general – have come a long way since Satoshi Nakamoto laid the groundwork for a “peer-to-peer electronic cash system” over a decade ago. The total crypto market capitalization has surpassed $2.5 trillion. People in dozens of countries are using crypto for peer-to-peer transactions or to preserve the value of their money.
The many reasons for turning to crypto
El Salvador has become the world’s first country to declare Bitcoin a legal tender. It’s debatable how an increasingly authoritarian ruler imposed a digital currency on an unwilling population, especially considering the digital currency was supposed to help people bypass the central oversight. Chivo, El Salvador’s government-backed Bitcoin wallet, has surpassed three million downloads.
El Salvador might not be the true reflection of global crypto adoption because Bitcoin was imposed on its people rather than residents pro-actively embracing it. In many other parts of the world it’s the public, rather than the government, that is increasingly using cryptocurrencies at the grassroots level.
According to the 2021 Global Crypto Adoption Index by Chainalysis, global crypto adoption skyrocketed 881% between July 2020 and June 2021. Much of this growth was driven by peer-to-peer transactions in emerging markets. The top five countries in terms of crypto adoption are Vietnam, India, Pakistan, Ukraine and Kenya. In fact, 16 out of the top 20 countries are emerging economies. The US occupied the 8th spot while China ranked 13th.
The Chainalysis rankings give more weightage to crypto usage by “ordinary people” and adjusts the adoption by purchasing power parity (PPP) per capita. That’s why countries like Vietnam and Kenya came out at the top despite the spectacular institutional adoption in North America and Europe.
People in countries like Venezuela, Nigeria, Vietnam, and Kenya rely on P2P crypto exchanges because they lack proper access to centralized exchanges or traditional banking services. Venezuelans have embraced crypto to preserve value of their money amid fiat devaluation. At one point in 2019, the inflation rate in Venezuela topped 10 million percent.
In sub-Saharan Africa, people are turning to crypto because they don’t want to pay upto 9.4% fee on cross-border transactions.
Europe buzzing with crypto activity
In terms of size, Central, Northern, and Western Europe (CNWE) has the largest crypto economy globally, with more than $1 trillion worth of crypto received between July 2020 and June 2021. Institutions in Europe and North America have shown strong interest in decentralized finance (DeFi). Institutional-size transansactions are transfers of more than $10 million worth of crypto.
Europe is home to a growing number of blockchain projects that are making crypto an integral part of our mainstream economy. Bistroo, for instance, is a Dutch direct-to-consumer platform for meals, food, and beverages. It has become a connecting link between thousands of restaurants and their customers, eliminating middlemen such as UberEats and TakeAway that take up to 30% of the order value as their commission. Bistroo allows customers to pay restaurants in its native BIST token or Bitcoin, Ethereum and Binance Coin.
Another project with a Europe based team helping individuals and businesses embrace crypto is Request Finance. Request, through its Invoicing and Payments products, allows freelancers, small businesses as well as corporations to send invoices and accept payments in crypto. It has processed more than $140 million worth of crypto invoices in less than a year of launch.
What about the Asian giants?
India and Japan have been relatively more open to crypto. The government of India has decided to “regulate” cryptocurrencies as an asset class rather than imposing an outright ban. India would not accept crypto as a payment method or legal tender.
Some claimed that India has as many as 100 million crypto users, the highest in the world. However, Nischal Shetty, founder of one of India’s largest crypto exchanges WazirX, has said that the real number is closer to 20 million than 100 million. The Reserve Bank of India Governor Shaktikanta Das has revealed that more than 70% of the crypto participants in India have invested only $13-$40 in crypto assets. So, the media hype about India could be detached from the ground reality.
Japan has been at the forefront of crypto innovation and adoption. It was one of the first countries to legally accept cryptocurrencies as digital assets, though it doesn’t consider crypto a legal tender because the central bank doesn’t issue it. You can legally use crypto as a means of payment in Japan. What’s more, the Japanese were among the first to start mining crypto.
China, on the other hand, has cracked down on crypto. It has put an end to all crypto transactions after having already banned Bitcoin mining. Some Chinese crypto news sites have also gone dark as Beijing’s crackdown on crypto continues. Publications such as ChainNews, Odaily and Block123 have become inaccessible.
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The Chinese crypto publications CoinDesk recently reached out to said that they would continue to post on Twitter and Telegram, both of which are banned in China. Meanwhile, the People’s Bank of China has been pilot testing the new Digital Yuan – a Central Bank Digital Currency (CBDC) – in Shenzhen and many other parts of the country.
Most governments and central banks are closely watching the adoption of crypto. The European Union, the UK, the United States, India, and many other countries plan to roll out their own Central Bank Digital Currencies (CBDCs) to offer some of the benefits of cryptocurrencies while still retaining control over the currency. Only time will tell how it plays out. But there is no denying that cryptocurrencies will continue to change the global financial landscape – including how people transact in their day-to-day lives – in the years to come.