Iran, Venezuela, and El Salvador have all had lengthy and painful crises, with high increases in inflation and living costs. Some citizens in these countries are now turning to cryptocurrencies as a form of commerce and a store of wealth. As a result, some researchers anticipate that bitcoin and other digital currencies may one day replace fiat currencies such as the Bolvar, Rial, and other unstable government-issued currencies. We’ll look at some of the possible reasons of these alterations in the next sections.
Even before bitcoin gained the attention of mainstream investors, Venezuelans were interested in the world’s biggest cryptocurrency. Venezuela imposed capital restrictions in 2003, and US sanctions have suffocated the country’s economy. Because hyperinflation has been a key role in the Venezuelan economy for decades, many Venezuelans have resorted to bitcoin and other cryptocurrencies as a safe haven for their money.
It is unknown how many Venezuelans have used cryptocurrencies, although according to a 2018 Cointelegraph story, the nation “already [had] at least several hundred bitcoin fans” by October 2014. In the years afterwards, interest has risen, and big businesses such as Burger King and Pizza Hut now accept bitcoin or dash payments.
The Venezuelan government is also aiming to profit from cryptocurrency. Despite the failure of the national Petro cryptocurrency to gain momentum, the Venezuelan government has created a state-run mining pool as well as a government-owned mining farm, according to Cointelegraph in April 2021.
In Venezuela, investors were drawn to bitcoin by inflation, capital constraints, and a desire for secrecy. Iran has suffered equally significant inflation on its national currency, with inflation reaching 35% in 2020. Nonetheless, it is a far lower inflation rate than Venezuela.
Some of the interest in cryptocurrencies in Iran may have been driven by the government. When inflation more than quadrupled in a matter of months, the government announced intentions to establish a state-run cryptocurrency over the summer. Nonetheless, Iranian businessmen have already made significant investments in the Bitcoin sector, and President Rouhani has encouraged the government to build a legal framework by June 2021.
However, the Iranian government is concerned about Bitcoin’s energy use and recently imposed a four-month mining embargo.
El Salvador is the most recent nation to express interest in cryptocurrencies, with MPs passing legislation to make bitcoin legal money. El Salvador, unlike other Latin American nations, does not have its own currency and depends on US dollars as a means of transaction. The nation thought that by making bitcoin legal money, it would assist El Salvador attain economic independence from the United States.
President Nayib Bukele stated in a speech outlining his proposal that bitcoin payments will make it simpler for Salvadorans living abroad to send money home. Salvadoran expats send roughly $700 million home each month on average, paying considerable wire transfer costs. Because bitcoin has no foreign transfer costs, many supporters feel it is well-suited for international transactions. The Salvadoran government has worked with numerous wallet and ATM companies to construct the required infrastructure to encourage bitcoin adoption.
The Bottom Line
As a consequence of local currency difficulties, several nations have witnessed increasing crypto acceptance. Do these and other instances of bitcoin’s ascent in economically challenged nations imply that the digital currency is set to take over on a global scale? Not always, since these countries have distinct challenges. Nonetheless, for some people of troubled nations, bitcoin has proved to be a means of avoiding local economic problems.
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