Metrics suggest that crypto adoption is growing globally. However, there are substantial differences in the pace and key drivers between countries and regions. Heck, there is even pushback in some places! Yet, the real-value use cases seem far more compelling than the risks proclaimed by naysayers.
Cryptocurrency adoption exploding
The global adoption of crypto has grown nearly nine times, according to Chainalysis’s latest crypto adoption report. At the end of Q2–2021, the total score stood at 24 vs 2.5 for the same period of the previous year. This represents a 2300% increase since Q3–2019 and 881% during the last year.
Different markets, different reasons
An in-depth reading of the report reveals that the central adoption drivers differ around the globe. In emerging markets, people often use crypto as a means of protecting their savings from inflation. In North America, Western Europe, and Eastern Asia, on the other hand, institutional demand is fueling the growth.
It is interesting to observe that one country stands as the clear leader by a large margin. Vietnam established a research group to study cryptocurrencies regulations recently. Moreover, the Southeast Asian country’s prime minister asked the central bank, The State Bank of Vietnam (SBV), to explore using blockchain for e-government in the coming years.
P2P platforms drive emerging markets growth
High-ranked emerging markets countries such as Vietnam, Nigeria, Kenya, and Venezuela have large transactions volumes on peer-to-peer (P2P) platforms. P2P is convenient for residents of these countries to tap into crypto when they can’t access a centralised exchange. Consequently, Africa, Latin America, and Central and Southern Asia send more web traffic to P2P platforms than regions with better-developed crypto infrastructure.
Use cases beyond payments
Although many associate cryptos and the P2P market with payments, there are other robust use cases.
- Israel’s use in multiple systems — ISA (Israel Securities Authority) announced in October 2018 that it’d use blockchain for cybersecurity. Initially used for ISA’s secure messaging system, blockchain technologies later empowered online voting, and a reports management system.
- Estonia’s securing of healthcare records — The Estonian government used blockchain to secure the health records of its 1.3 million residents in 2016. Essentially, they used blockchain as an extra layer of security, ensuring the integrity of health records.
- Blockchain in the UAE government — The Emirates Blockchain Strategy 2021 aims to migrate half the government’s transactions to the blockchain platform. Additionally, The Dubai Blockchain Strategy seeks to help Dubai become “the first city fully powered by Blockchain by 2020 and make Dubai the happiest city on earth”. Government efficiency, industry creation, and international leadership would be the key strategic pillars.
- South Africa’s retail central bank digital currency (CBDC) trial — The South African Reserve Bank (SARB) announced in May 2021 that it would examine the feasibility of a general-purpose or retail CBDC. Project Khokha, a proof-of-concept (PoC), simulated a trial of a distributed ledger technology (DLT)-based wholesale payment system. Results revealed that the use of blockchain for processing daily payments could compress the required time to two hours while preserving the transaction confidentiality and settlement finality.
- Japan’s e-voting system — Tsukuba City Council announced in late 2020 its plans to use blockchain-based electronic voting. The solution effectively manages records and voting results while preventing double voting and offering secure storage. Moreover, Russia and the United States have also explored such solutions.
There is pushback
Not all countries are universally supportive of crypto, though. For instance, in February 2021, the Central Bank of Nigeria (CBN) prohibited banks and other financial institutions from facilitating crypto transactions. However, the politics of this decision are complex and highlight the conflicting attitudes and interests of Nigerians and their government toward crypto.
Ultimately, regulations rather than prohibitions are likely to align the interests of both sides. This approach could increase government income through crypto taxes while allowing people to transact safely through regulated institutions.
More recently, China outright banned financial institutions from providing crypto-related services. This decision made it more difficult for individuals to transact in crypto. It also impacted miners as it became harder for them to sell crypto and buy yuan. Finally, it challenged financial institutions to identify crypto-related money flows.
Only time will tell whether China’s actions will lead to similar regulations globally. Рegulating a market is a natural part of its maturation. It also can prevent financial disasters and protect consumers when done proactively instead of reactively. Consider how regulation of the centralised financial system could have reduced the severity and impact of the global financial crisis of 2008. Of course, systemic risks are far smaller or non-existent with crypto due to the decentralised nature of blockchain.
From another perspective, China’s crackdown on Bitcoin has positive aspects too. Since nearly ⅔ of all bitcoin mining was taking place in China, the forced relocations will decentralise the process. Additionally, distributing mining to other locations will decrease its environmental impact due to the better availability of sustainable energy resources. Whether proof-of-work mining is even sustainable long-term is a topic for another discussion.
It is essential to stay grounded and realistic to have a balanced perspective on crypto adoption. Whereas some coins’ prices can increase multiple times in a matter of days, this tells us little about the overall state of the market. The growth in institutional demand that started in 2020 was a more reliable indicator of increasing acceptance. However, it has all but evaporated recently following May’s deep price correction.
Will other countries introduce strict crypto regulations like China or warmly embrace bitcoin miners like North America? Will more governments and organisations leverage blockchain technologies to solve real-world problems or prefer older, more familiar approaches? Many questions remain.
Ultimately, an objective appraisal indicates far more advantages than risks associated with crypto and blockchain. Therefore, the essential question is not ‘whether’ but ‘how’ to use them securely, effectively, and sustainably. Thus, we, Cudos, are delighted to be your partner along this path and facilitate the evolution toward a more decentralised and sustainable world.
The Cudos Network is a layer 1 blockchain and layer 2 computation and oracle network designed to ensure decentralised, permissionless access to high-performance computing at scale and enable scaling of computing resources to 100,000’s of nodes. Once bridged onto Ethereum, Algorand, Polkadot, and Cosmos, Cudos will enable scalable compute and Layer 2 Oracles on all of the bridged blockchains.
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