Demand for cryptocurrencies has been increasing globally since the beginning of the Corona pandemic until emerging markets economies began to look to rely on them as a means of recovery support.
The interest of large companies in cryptocurrencies led by Bitcoin has grown, especially with the recent announcement of the American electric car maker Tesla to invest 1.5 billion dollars in this currency and major financial institutions such as MasterCard.
Amidst the record performance of cryptocurrencies, some people, especially in emerging markets, have moved to rely on them for online shopping and economic transformations to eliminate restrictions, according to a research note issued by Oxford Business.
Cryptocurrencies and Emerging Markets
The memo is based on data reported by the global statistics company “Statista,” which detected a slight increase in the use of digital currencies as a means of sending remittances.
Nigeria pioneered the use of bitcoin and cryptocurrencies last year to make transfers.
According to some perceptions, Nigerians have resorted to these currencies to avoid the country’s exaggerated exchange rate.
Cryptocurrencies can now be bought and sold via mobile devices, which means that they can be traded in areas with limited ICT infrastructure or by people who do not have access to a computer.
Cryptocurrencies are also increasingly used by freelancers to receive cross-border payments from outside businesses, which means that there will be an acceleration in the spread of digital currencies with the increase in digital conversion.
Oxford Business indicated that despite the price fluctuations of digital currencies, it is considered a more reliable option than traditional currencies for some investors in emerging countries.
In this regard, the stock platform “TradingView” has released data showing an increase in cryptocurrencies in countries characterized by instability, including Libya, Cuba, and, most recently, Myanmar.
Other emerging market models
Among the most prominent emerging markets that have moved to integrate bitcoin and other cryptocurrencies, Costa Rica is one of the few countries in the world where workers may be legally paid with these currencies.
As a result, the Bitcoin adoption rate has increased, especially since the country has a comparative advantage in cryptocurrency mining, thanks to reliance on renewable resources to generate more than 90% of energy, making mining less environmentally harmful and more profitable, according to Oxford Business.
The research note touched on the Philippines’ model known for its support for cryptocurrencies, as the central bank agreed in June 2020 to exchange cryptocurrencies.
According to a survey conducted by the company “Statista,” 20% of Filipinos participating in an opinion poll confirmed the use of cryptocurrencies in their dealings during 2020.
While Vietnam is an exciting case, citizens witness a demand for digital currencies, despite the central bank banning their use as a payment method.
Even 21% of the respondents in the “Statista” survey confirmed the use of digital currencies in daily transactions, ranking second in the world behind Nigeria.
There is also demand for these currencies among the public in many African markets, such as Morocco, South Africa, and Kenya.
National digital currencies
Official banks in several countries have begun to participate in the cryptocurrency system to take advantage of its advantages and regulate the market as much as possible.
Oxford Business points out that these currencies are based on the blockchain system and are known as central bank digital currencies (CBDCs).
Unlike cryptocurrencies, central bank digital currencies are not an entirely new type of currency but rather a digital form of currency supported and issued by the central bank.
China is a pioneer in this field and is currently experimenting with the digital yuan.
Six state-owned banks and two private banks participate in the experiment, which began with a “red envelope” lottery. People win digital tokens that they can spend with digital or physical merchants.
Meanwhile, India is looking to move to ban cryptocurrencies, but it is exploring the possibility of issuing a digital rupee in parallel.
On the other hand, some central banks’ experiences in issuing digital currencies were not successful, such as Ecuador, which was the first country to give this currency in 2014. Still, it has been withdrawn since then after failing to attract large numbers of users or good volumes of payments.
Senegal’s experiment also failed in this regard, but the country is witnessing a renewed interest in a national cryptocurrency.
Oxford Business concludes the research note by saying, “Examples like these suggest a widespread belief that cryptocurrencies should be handled with care. They offer a range of benefits to investors and governments in emerging markets economies around the world, and that they have the potential to help lead the way out of the economic downturn caused by the pandemic “Corona. “