In 2021, the Central American nation of El Salvador became the first in the world to adopt the leading cryptocurrency, Bitcoin, as a legal tender. The move was hailed as a significant step towards mainstream crypto adoption and praised by crypto enthusiasts as an innovative step toward the future of financial tech.
Although El Salvador has (so far) gone further than any other country, it’s certainly not alone in embracing crypto. Neighboring Honduras, for example, has set up a special economic zone like Prospera where crypto use is allowed to flourish. Local businesses in Prospera have worked with blockchain solutions provider Pundi X to adopt blockchain-based point-of-sale machines called XPOS, which make transacting in crypto as easy as swiping a card. It’s worth noting that Pundi X has already provided XPOS to other countries, such as Turkey.
Other countries in the world, such as Vietnam and Nigeria, have recorded high levels of crypto adoption. Mainstream crypto adoption has arguably already been achieved in these countries: Statista has found that one-in-three Nigerians held or used crypto assets during 2021.
Of course, there are still other countries that vehemently oppose crypto use. China, for example, still has a strict crypto ban.
So why do some countries love crypto so much more than others?
Crypto as a stepping stone to financial inclusion
It’s been pointed out that creating a blockchain wallet address is easier than opening a traditional bank account. For instance, getting into crypto only requires an internet connection and a device (a smartphone or a computer). In contrast, opening a traditional bank account requires you to fill out a slew of application forms, provide multiple valid IDs, and then provide a maintaining balance. The rigid requirements of a traditional bank account already exclude quite a large number of people, especially in developing countries.
Crypto’s accessibility makes it a no-brainer for non-institutional traders/investors looking to access a global market. The accessibility is also why it’s no coincidence that crypto is especially popular in developing countries such as the ones cited above.
Accessibility isn’t the only reason people in developing countries gravitate toward crypto.
One of the main unique selling propositions of crypto has always been the low transaction fees attached. For example, you can easily send thousands of dollars worth of Bitcoin from one wallet in England to another wallet in Vietnam and pay little to nothing in transaction fees. This is because crypto is decentralized — there are no multiple intermediates to process the transactions, and the two people transacting are the only ones that matter.
Compare this to traditional means of sending money, like remittances. Sending remittances typically costs 6% of the total money sent. It’s not always instantaneous either like crypto is — sending money from one continent to the other could take a few days.
In countries like the Philippines, where remittances are a huge part of the economy, more people are choosing to send money back home with crypto for the simple reason that it lets people keep more of their hard-earned money.
Crypto is volatile to the point that it’s one of its main characteristics. After all, Bitcoin hit its all-time high valuation ($65,000 to one bitcoin) in November 2021 — only to plummet in value just months later back down to $16,000 to one bitcoin.
It’s not just Bitcoin, either. Cryptocurrencies like Ether and Dogecoin have enjoyed stellar, nearly-overnight increases in value only to lose it all within days or weeks. Yet the temptation to use crypto as a ‘get rich quick’ scheme still remains for many.
Cryptocurrency tends to be popular in developing countries with younger populations. There is the allure of big gains, it’s easy to get into, and can even save money in some cases (like remittances). Through the eyes of a young person willing to take more risks, crypto is an attractive asset to own.
Although there are still many countries that remain wary of crypto, the reality is that it’s here to stay. While it may be soon to tell, we may see more countries in the future embracing crypto rather than shunning it.