Rise of Crypto Adoption
A larger part of increased crypto adoption is driven by peer-to-peer transactions from emerging markets, as these countries attempt to promote tech entrepreneurship and more financial inclusion. Citizens, on the other hand, use Bitcoin to cushion themselves against their respective local currency devaluation.
Cryptocurrency adoption has risen over the past few years, with last year alone recording up to 881% adoption rate, mostly driven by peer-to-peer transactions and use cases. Crypto was designed as a peer-to-peer digital currency, hence it’s not surprising to see peer-to-peer transactions driving its increased usage across the globe. While large-scale investors and institutions are increasingly participating in cryptocurrency projects, one of the most important drivers of crypto adoption is the retail investors that mainly use it as a medium of exchange and individual saving. While huge economies such as China just banned Bitcoin, others emerging markets countries are increasingly embracing it.
Rising adoption in emerging markets
According to a report on Global Crypto Adoption Index by the blockchain data firm, Chinalysis, most countries that occupied the top 20 in the list of biggest crypto adopters were emerging countries such as Vietnam, India, Pakistan, Kenya, Nigeria, Venezuela, and Togo among others. These countries are characterized by a young and tech-savvy population who are curious to try out the new digital currencies.
The motivation to adopt crypto such as Bitcoin is driven by the needs and the state of the economy in those countries. First, citizens of these countries turn to cryptocurrency to preserve their savings in the face of their local currency devaluation. They also use Bitcoin and other major cryptocurrencies to send and receive remittances and carry out business transactions. For instance, counties such as Kenya, Nigeria, Vietnam, and Venezuela reported huge peer-to-peer transaction volumes.
Bitcoin as a legal tender
Cryptocurrency adoption can never be complete without discussing the idea of legalizing crypto as a legal tender. The process of legalization of Bitcoin as a legal tender means a government activates all the legal instruments to give sovereign backing to the cryptocurrency. A legal tender can be used to pay bills and buy goods and services, among all that can be done with fiat currency.
On June 9, 2021, El Salvador became the first country in the world to officially include Bitcoin as a legal tender. The proposal by Salvadorian President Nayib Bukele was approved by the parliament, as the country became the first country to recognize the world’s largest and the most popular cryptocurrency as legal currency. The aim was to make it easy for Salvadorans living abroad to remit money back home. The adoption has taken effect after the government facilitated the installation of 200 ATMs across the country to ease withdrawals.
Although no other country has come out to legalize Bitcoin after El Salvador, several countries are considering following the Central American country’s footsteps in adopting Bitcoin as a legal tender. They include Paraguay, Panama, Brazil, and Mexico among others.
As the trend seems to concentrate in Latin America, it’s imperative to understand that the motivation behind it may be varied. For example, the interest in Bitcoin in Panama could be driven by the country’s desire to attract tech entrepreneurs, if sentiments by the politicians are anything to go by. Boosting entrepreneurship is aimed at increasing the country’s job prospects and boosting the economy through financial inclusion to thousands of people outside the formal economy as crypto transactions are peer-to-peer.
