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How Fiat Currency Scandals Drive Countries Toward Bitcoin Adoption
Bitcoin has been in the headlines for much of 2018, as its price continues to break records and climb higher. where fiat currency scandals have driven citizens to cryptocurrency.
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Protracted and painful crises have hit countries like Iran, Venezuela, and El Salvador, leading to significant hikes in inflation and the cost of living. Cryptocurrencies are gaining popularity as a medium of trade and a mechanism to hold value in these countries. Because of this, there are others who believe bitcoin and similar digital currencies will eventually replace fiats like the Bolivar and the Rial, both of which have had significant difficulties recently. Some of the reasons for these changes will be discussed below.
Venezuela
There was interest in the major cryptocurrency in Venezuela even before it became a hot commodity among institutional investors. The sanctions imposed by the United States have suffocated Venezuela's economy, and the country's 2003 implementation of capital restrictions hasn't helped matters. Given the hyperinflation that has plagued the Venezuelan economy for decades, many people there have resorted to bitcoin and other cryptocurrencies as a safe way to safeguard their wealth.
No reliable data exists on the number of Venezuelans who have used cryptocurrencies, while a 2018 article from Cointelegraph claims the nation "already [had] at least several hundred bitcoin fans" by October 2014.
The following years saw a rise in popularity, leading to the acceptance of bitcoin and Dash as methods of payment at fast food chains including Burger King and Pizza Hut.
The government of Venezuela is not immune to the lure of cryptocurrency. As reported by Cointelegraph in April 2021, the Venezuelan government has opened a state-run mining pool and a government-owned mining farm, despite the lack of success of the national Petro cryptocurrency.
Iran
Investors in Venezuela turned to bitcoin because of inflation, capital limitations, and a need for anonymity. The national currency of Iran has also devalued dramatically, with inflation reaching 35% in 2020.
But it's still a lot more manageable than Venezuela's hyperinflation.
The Iranian government may have had a role in promoting cryptocurrency's popularity. Over the summer, the government revealed its intentions to develop a state-run cryptocurrency after the inflation rate more than quadrupled in a few months. Despite this, Iranian investors had already participated heavily in the cryptocurrency market by June 2021, when President Rouhani first called for the establishment of a legal framework.
The Iranian government, concerned about Bitcoin's energy use, has also just banned mining for the cryptocurrency for four months.
El Salvador
El Salvador is the most recent nation to adopt cryptocurrencies; the country's lawmakers have passed a bill to recognize bitcoin as legal cash. El Salvador, in contrast to many other Latin American nations, uses the United States dollar as its only legal tender. El Salvador anticipated that by using bitcoin as official cash, it may one day be economically independent of the United States.
Bitcoin payments, President Nayib Bukele stated in a speech announcing the plan, will facilitate simpler remittances from Salvadorans living overseas.
Expats from El Salvador send home roughly $700 million monthly, costing the country a fortune in wire transfer fees.
Many Bitcoin proponents think it's a good idea to use Bitcoin for cross-border transactions since there are no associated costs with doing so. The government of El Salvador has worked with numerous wallet and ATM companies to set up the required infrastructure to make widespread use of bitcoin possible.
Conclusion
As a consequence of national currency issues, crypto has gained popularity in several nations. Do these and other cases when economic hardship coincides with a growth in bitcoin's popularity portend a worldwide currency takeover by the digital currency? Since each of these countries is dealing with its own unique set of circumstances, the answer is no. However, Bitcoin has provided a path out of economic hardship for certain people in struggling nations.
FAQ
How exactly does Bitcoin pose a problem for traditional currencies?
It still takes money to print and mint new currency and administer existing forms of currency, even if the value of fiat currency is based entirely on public confidence in its stability. There would be no need to pay such fees if cryptocurrencies didn't exist in the digital world.
Is there a central bank that backs Bitcoin?
for the time being, at least. Bitcoin, like the US dollar and other fiat currencies, is not backed by anything tangible; its value as a medium of exchange is all that matters. The mathematics behind Bitcoin's blockchain is one of its selling points.
Why are so many nations in South America jumping on the Bitcoin bandwagon?
Adoption of cryptocurrencies in Latin America has skyrocketed over the last several years. The widespread use of cryptocurrencies may be traced back to the enabling circumstances provided by high inflation, political instability, and the limited availability of conventional financial services.
That's all for today, see ya tomorrow! If you want more, be sure to follow our Twitter (@croxroadnews)
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
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