If you are reading this, then it’s likely you are living in a country with a stable fiat currency. Outside of ideological reasons and speculation, are there any other pressing reasons to use peer-to-peer cryptocurrencies? Quite simply, there is no immediate need for people to adopt a peer to peer currency when fiat currency works just about fine (if that currency is reasonably stable and with good access to banking).
However, there are a few countries in the world where fiat currencies are quite obviously failing and are experiencing a rapidly increasing inflation. The IMF projects that the Venezuelan Bolivar will have an inflation rate of one million percent by the end of 2018. In the face of rampant inflation, common cryptocurrency fluctuations of 10-20% in a day don’t look that scary at all. Indeed, to these people cryptocurrency looks like a relatively strong store of value.
In addition, countries experiencing high levels of inflation usually start imposing capital controls and restricting their citizens access to their own cash. In September 2017, Venezuela limited their citizens cash withdrawals to just 31p or 40 cents a day. It is this type of environment where peer-to-peer cryptocurrency (that doesn’t go through financial institutions) has the most value.
Sadly, this financial oppression by governments is not a one off. It happens more commonly than you think and even sometimes in Western nations. In October 2016, the Greek government seized €1.6 billion from their own citizens bank accounts to meet national debt obligations.
Peer-to-peer cryptocurrencies have no government backdoor. That’s why countries imposing strict capital controls should, in theory, be fertile grounds for true cryptocurrency adoption.
Right now, there are around 2 billion unbanked people in the world according to the World Economic Forum. The exclusion of this demographic from the traditional financial sector brings with it an opportunity for both the unbanked to participate in the global economy and for cryptocurrencies to achieve true adoption.
We believe that the countries with the best chances of true cryptocurrency adoption will exhibit the following characteristics:
- The country will be challenged by their currency and access to banking .
- The native fiat currency will be experiencing high levels of inflation.
- The government would have imposed oppressive capital controls on their citizens.
- Citizens will have a strong distrust of financial institutions and government.
- A significant proportion of the population will be unbanked.