Cryptocurrencies. Until 2022 came around, it was once the hottest topic around the office water cooler. Everyone and their mother seemed to have their own opinion of it. We all knew at least one “Crypto bro” who proudly flaunted their endeavors to sound smarter than you. Let’s calm down Chad, your crypto “portfolio” is based on a couple twitter memes you thought were hilarious. Then you have your adamant crypto haters who believe the whole thing is a scam and just another way for bad guys to steal your money. I feel like most people though seem to be somewhere in between, largely due to simply not knowing enough about how cryptocurrencies work and the purposes that they serve. Yeah, there are reasons to be cautious because fraud, theft, and bankruptcy have all occurred in the crypto space, but how much of this is the fault of cryptocurrency versus general human behavior?  

A main argument against crypto is that it’s used by criminals for money laundering. While this is true, it doesn’t necessarily look at the big picture. A study found that about $8.6 billion was laundered through cryptocurrencies, accounting for about 0.05% of all crypto transactions. By comparison, the UN Office of Drugs and Crime estimates that between $800 billion and $2 trillion of fiat currency is laundered each year — as much as 5% of global GDP.”[1] The real truth is that fiat currencies, especially the U.S. Dollar continue to be the go-to choice for money launderers today. It’s not as easy to launder through crypto exchanges as some may portray. “Know-Your-Customer” (KYC) standards are being implemented in almost all crypto exchanges. These are the same standards our financial institutions use to verify a customer’s identity to prevent fraud. The U.S. $100 bill is still the more effective and preferred method offering complete privacy and the ability to easily fit $1,000,000 in a small suitcase that weighs no more than 10kg.[2]

In reality, the world of cryptocurrency should be viewed as a new technology rather than some sort of get-rich-quick scheme as many of our infamous “Crypto bros” see it. Technology is a tool that serves to fix a real problem. All new technology is rudimentary at first and will have its flaws. Just think of the phone, computer, or even the internet. These technologies have come a long way from their roots but were once seen as radical and pure “baloney”[3]. However, with time and continued innovation, the technology is improved and becomes more accessible and useful to the everyday person.

Cryptocurrency is no different. Most critics argue that it is highly speculative and unproven, questioning the usefulness of this technology[4]. However, these critics tend to be from western developed nations that already have stable currencies and financial institutions. In developing nations across the world though, many people are starting to find cryptocurrency as a life-changing tool for various reasons. Chainalysis, a leading blockchain data research company, found that last year, “Worldwide Adoption Jumps Over 880% With P2P Platforms Driving Cryptocurrency Usage in Emerging Markets” in their 2021 Geography of Cryptocurrency Report. So why are people in emerging markets turning to cryptocurrencies so quickly? The report gives three main reasons:

1.     Refuge against inflation

2.     Protection against Authoritarian Regimes

3.     Remittances

Below is a chart by Chainalysis that provides the top 20 countries that have adopted cryptocurrencies the most. As you can see, almost all of these countries are developing nations.

For high inflation economies like Argentina, Venezuela, and Turkey, one form of cryptocurrencies, called stablecoins, is becoming very useful. As we all know, when there are high levels of inflation, saving your money is almost useless and you are strongly urged to spend your income as soon as you receive it before prices keep going up. Stablecoins are a cryptocurrency that is pegged to the value of another asset, typically another country’s fiat currency like the US Dollar. Individuals in these countries investing in these coins are finally able to save their income and grow their wealth where otherwise would’ve been near impossible.

Cryptocurrencies have also been shown to be crucial for civilians under threat by an authoritarian government regime in Nigeria, Ukraine, and Venezuela. When Russia first invaded Ukraine, the financial system instantly went under a lot of strain. ATMs were running out of cash and the Ukrainian central bank suspended electronic cash transfers. Even when many Ukrainians were able to flee to neighboring countries, they couldn’t bring their money with them. However, those who were able to convert their savings into Bitcoin, for example, were able to bypass the restrictions imposed by their government.[6] Moreover, Ukraine raised over $54m in donations from across the world in cryptocurrencies, which are particularly suited to international fundraising because it doesn’t respect national boundaries and it’s censorship-resistant — there is no central authority that can block transactions, for example in response to sanctions”.[7]

In 2020, mass protests erupted in Nigeria against the government because of brutal actions by a unit of the police force called the “Special Anti-Robbery Squad” (SARS). The protests needed funding to cover the costs of food, water, transportation, medical supplies, etc. A group known as the Feminist Coalition become one of the key organizations accepting donations for the protests. However, the government froze many bank accounts and took down donation links online to damper the movement.  “While the move may have proven to be a death-knell for the donation drive a decade ago, it only proved a temporary setback: Feminist Coalition began accepting donations through bitcoin instead.”[8] Cryptocurrency took away power from the Nigerian government and put it back into the hands of the people.

In Venezuela, people are turning to Bitcoin for the dual reason of saving since their currency, the Bolivar, has depreciated by 99.16% against the U.S. Dollar since Jan. 2020[9], but also as a means of payment just to buy necessities like food and medical supplies. The widespread adoption of crypto in Venezuela has been a headache for Nicolas Maduro’s corrupt government. People can now engage in commerce without government interference enabling a black market that is outside the government’s control. To combat this, the Maduro regime came up with their own cryptocurrency called “Petro” in an attempt to nationalize the crypto market. But that is the beauty of cryptocurrencies. It is a technology that cannot be nationalized, striking fear at the hearts of all socialist authoritarians around the world. “It is entirely plausible that state-backed economic freedoms in the form of cryptocurrency will help weaken government control over its citizens and inadvertently usher in more libertarian economic policies by weakening the control of the state.”[10] The Petro, as one can imagine, was widely rejected by the people from its inception and was a complete failure.

Finally, remittances are an important part of many emerging market economies and also a fast-growing area for crypto adaptation for many reasons. While regular fiat currencies have many international fees and border restrictions imposed on them, cryptocurrencies avoid these obstacles. Mexico is the second-largest recipient of remittances in the world after India according to the World Bank [11] and many people depend on them just to meet their everyday needs. Bitso is a relatively new Latin American crypto exchange platform that uses the stablecoin USDC to process international transfers. “Bitso processed $1 billion in crypto remittances between Mexico and the U.S. in the first half of 2022 – up 400% from the same period last year – and plans to process $1 billion more by the end of December.”[12] Bitso also operates in Brazil, Argentina, and Colombia and was even recently used to trade a professional soccer player from Argentina to Brazil for a rumored $8 million USDC.[13] People and businesses adopting technologies like Bitso are saving money and improving their living standards.

All this goes to show the impact that cryptocurrencies are having around the world. It is a real technology that is being used to solve real-world issues. It is much more than just speculative investment schemes or a money laundering trick. The truth is that if your currency is experiencing inflation, you now have an alternative currency to save in. If your government is infringing on your financial freedom, you now have an entire system to bypass their restrictions. If you’re an immigrant and need to support your family back home, you can do so and not be taxed by financial institutions or blocked by government restrictions. People in developing nations do not use cryptocurrencies because they want to feel cooler than you like your office “crypto bro”. They use it because it gives them a little more power and freedom to live the life that they want to live.

Yes, there are still improvements to be made in cryptocurrency technologies, however, it is important to let it breathe and grow organically. There’s a reason why authoritarian governments like China, Russia, and India have banned this technology. The best way a government can control its people is by controlling their wealth. Cryptocurrencies represent a financially free world, giving people anywhere across the world choice in how they want to manage their finances. Therefore, a country that truly believes in individual freedoms has nothing to fear, and in fact, should be helping this technology grow. Cryptocurrency might just be the most effective tool to promote democracy and freedom around the world, far better than any drone strike or U.N. conference could ever do.  

Sincerely,

The Canny Wolf

Leave a comment

[1] https://blog.chainalysis.com/reports/2022-crypto-crime-report-preview-cryptocurrency-money-laundering/

[2] https://www.moneyandbanking.com/commentary/2017/11/12/cash-is-king-but-100-bills-are-for-crooks

[3] https://thenextweb.com/news/newsweek-1995-buy-books-newspapers-straight-intenet-uh

[4]

https://concerned.tech/

[5] https://go.chainalysis.com/rs/503-FAP-074/images/Geography-of-Cryptocurrency-2021.pdf

[6] https://www.cnbc.com/2022/03/23/ukrainian-flees-to-poland-with-2000-in-bitcoin-on-usb-drive.html

[7] https://www.cnbc.com/2022/03/03/ukraine-raises-54-million-as-bitcoin-donations-surge-amid-russian-war.html

[8] https://qz.com/africa/1922466/how-bitcoin-powered-nigerias-endsars-protests/

[9]

[10] https://fee.org/articles/how-bitcoin-could-smash-socialism-in-venezuela/

[11] https://www.worldbank.org/en/news/press-release/2022/05/11/remittances-to-reach-630-billion-in-2022-with-record-flows-into-ukraine

[12] https://www.coindesk.com/business/2022/06/16/bitso-processed-1b-in-crypto-remittances-between-mexico-and-the-us-in-first-half-of-2022/

[13] https://www.coindesk.com/business/2022/07/29/two-soccer-teams-transfer-a-south-american-player-using-usdc-but-theres-collateral-damage/#:~:text=Andr%C3%A9s%20Engler%20is%20a%20CoinDesk,He%20holds%20BTC%20and%20ETH.&text=This%20week%2C%20S%C3%A3o%20Paulo%2C%20one,Nothing%20unusual%20there.

Cryptocurrencies. Until 2022 came around, it was once the hottest topic around the office water cooler. Everyone and their mother seemed to have their own opinion of it. We all knew at least one “Crypto bro” who proudly flaunted their endeavors to sound smarter than you. Let’s calm down Chad, your crypto “portfolio” is based on a couple twitter memes you thought were hilarious. Then you have your adamant crypto haters who believe the whole thing is a scam and just another way for bad guys to steal your money. I feel like most people though seem to be somewhere in between, largely due to simply not knowing enough about how cryptocurrencies work and the purposes that they serve. Yeah, there are reasons to be cautious because fraud, theft, and bankruptcy have all occurred in the crypto space, but how much of this is the fault of cryptocurrency versus general human behavior?  

A main argument against crypto is that it’s used by criminals for money laundering. While this is true, it doesn’t necessarily look at the big picture. A study found that about $8.6 billion was laundered through cryptocurrencies, accounting for about 0.05% of all crypto transactions. By comparison, the UN Office of Drugs and Crime estimates that between $800 billion and $2 trillion of fiat currency is laundered each year — as much as 5% of global GDP.”[1] The real truth is that fiat currencies, especially the U.S. Dollar continue to be the go-to choice for money launderers today. It’s not as easy to launder through crypto exchanges as some may portray. “Know-Your-Customer” (KYC) standards are being implemented in almost all crypto exchanges. These are the same standards our financial institutions use to verify a customer’s identity to prevent fraud. The U.S. $100 bill is still the more effective and preferred method offering complete privacy and the ability to easily fit $1,000,000 in a small suitcase that weighs no more than 10kg.[2]

In reality, the world of cryptocurrency should be viewed as a new technology rather than some sort of get-rich-quick scheme as many of our infamous “Crypto bros” see it. Technology is a tool that serves to fix a real problem. All new technology is rudimentary at first and will have its flaws. Just think of the phone, computer, or even the internet. These technologies have come a long way from their roots but were once seen as radical and pure “baloney”[3]. However, with time and continued innovation, the technology is improved and becomes more accessible and useful to the everyday person.

Cryptocurrency is no different. Most critics argue that it is highly speculative and unproven, questioning the usefulness of this technology[4]. However, these critics tend to be from western developed nations that already have stable currencies and financial institutions. In developing nations across the world though, many people are starting to find cryptocurrency as a life-changing tool for various reasons. Chainalysis, a leading blockchain data research company, found that last year, “Worldwide Adoption Jumps Over 880% With P2P Platforms Driving Cryptocurrency Usage in Emerging Markets” in their 2021 Geography of Cryptocurrency Report. So why are people in emerging markets turning to cryptocurrencies so quickly? The report gives three main reasons:

1.     Refuge against inflation

2.     Protection against Authoritarian Regimes

3.     Remittances

Below is a chart by Chainalysis that provides the top 20 countries that have adopted cryptocurrencies the most. As you can see, almost all of these countries are developing nations.

For high inflation economies like Argentina, Venezuela, and Turkey, one form of cryptocurrencies, called stablecoins, is becoming very useful. As we all know, when there are high levels of inflation, saving your money is almost useless and you are strongly urged to spend your income as soon as you receive it before prices keep going up. Stablecoins are a cryptocurrency that is pegged to the value of another asset, typically another country’s fiat currency like the US Dollar. Individuals in these countries investing in these coins are finally able to save their income and grow their wealth where otherwise would’ve been near impossible.

Cryptocurrencies have also been shown to be crucial for civilians under threat by an authoritarian government regime in Nigeria, Ukraine, and Venezuela. When Russia first invaded Ukraine, the financial system instantly went under a lot of strain. ATMs were running out of cash and the Ukrainian central bank suspended electronic cash transfers. Even when many Ukrainians were able to flee to neighboring countries, they couldn’t bring their money with them. However, those who were able to convert their savings into Bitcoin, for example, were able to bypass the restrictions imposed by their government.[6] Moreover, Ukraine raised over $54m in donations from across the world in cryptocurrencies, which are particularly suited to international fundraising because it doesn’t respect national boundaries and it’s censorship-resistant — there is no central authority that can block transactions, for example in response to sanctions”.[7]

In 2020, mass protests erupted in Nigeria against the government because of brutal actions by a unit of the police force called the “Special Anti-Robbery Squad” (SARS). The protests needed funding to cover the costs of food, water, transportation, medical supplies, etc. A group known as the Feminist Coalition become one of the key organizations accepting donations for the protests. However, the government froze many bank accounts and took down donation links online to damper the movement.  “While the move may have proven to be a death-knell for the donation drive a decade ago, it only proved a temporary setback: Feminist Coalition began accepting donations through bitcoin instead.”[8] Cryptocurrency took away power from the Nigerian government and put it back into the hands of the people.

In Venezuela, people are turning to Bitcoin for the dual reason of saving since their currency, the Bolivar, has depreciated by 99.16% against the U.S. Dollar since Jan. 2020[9], but also as a means of payment just to buy necessities like food and medical supplies. The widespread adoption of crypto in Venezuela has been a headache for Nicolas Maduro’s corrupt government. People can now engage in commerce without government interference enabling a black market that is outside the government’s control. To combat this, the Maduro regime came up with their own cryptocurrency called “Petro” in an attempt to nationalize the crypto market. But that is the beauty of cryptocurrencies. It is a technology that cannot be nationalized, striking fear at the hearts of all socialist authoritarians around the world. “It is entirely plausible that state-backed economic freedoms in the form of cryptocurrency will help weaken government control over its citizens and inadvertently usher in more libertarian economic policies by weakening the control of the state.”[10] The Petro, as one can imagine, was widely rejected by the people from its inception and was a complete failure.

Finally, remittances are an important part of many emerging market economies and also a fast-growing area for crypto adaptation for many reasons. While regular fiat currencies have many international fees and border restrictions imposed on them, cryptocurrencies avoid these obstacles. Mexico is the second-largest recipient of remittances in the world after India according to the World Bank [11] and many people depend on them just to meet their everyday needs. Bitso is a relatively new Latin American crypto exchange platform that uses the stablecoin USDC to process international transfers. “Bitso processed $1 billion in crypto remittances between Mexico and the U.S. in the first half of 2022 – up 400% from the same period last year – and plans to process $1 billion more by the end of December.”[12] Bitso also operates in Brazil, Argentina, and Colombia and was even recently used to trade a professional soccer player from Argentina to Brazil for a rumored $8 million USDC.[13] People and businesses adopting technologies like Bitso are saving money and improving their living standards.

All this goes to show the impact that cryptocurrencies are having around the world. It is a real technology that is being used to solve real-world issues. It is much more than just speculative investment schemes or a money laundering trick. The truth is that if your currency is experiencing inflation, you now have an alternative currency to save in. If your government is infringing on your financial freedom, you now have an entire system to bypass their restrictions. If you’re an immigrant and need to support your family back home, you can do so and not be taxed by financial institutions or blocked by government restrictions. People in developing nations do not use cryptocurrencies because they want to feel cooler than you like your office “crypto bro”. They use it because it gives them a little more power and freedom to live the life that they want to live.

Yes, there are still improvements to be made in cryptocurrency technologies, however, it is important to let it breathe and grow organically. There’s a reason why authoritarian governments like China, Russia, and India have banned this technology. The best way a government can control its people is by controlling their wealth. Cryptocurrencies represent a financially free world, giving people anywhere across the world choice in how they want to manage their finances. Therefore, a country that truly believes in individual freedoms has nothing to fear, and in fact, should be helping this technology grow. Cryptocurrency might just be the most effective tool to promote democracy and freedom around the world, far better than any drone strike or U.N. conference could ever do.  

Sincerely,

The Canny Wolf

Leave a comment

[1] https://blog.chainalysis.com/reports/2022-crypto-crime-report-preview-cryptocurrency-money-laundering/

[2] https://www.moneyandbanking.com/commentary/2017/11/12/cash-is-king-but-100-bills-are-for-crooks

[3] https://thenextweb.com/news/newsweek-1995-buy-books-newspapers-straight-intenet-uh

[4]

https://concerned.tech/

[5] https://go.chainalysis.com/rs/503-FAP-074/images/Geography-of-Cryptocurrency-2021.pdf

[6] https://www.cnbc.com/2022/03/23/ukrainian-flees-to-poland-with-2000-in-bitcoin-on-usb-drive.html

[7] https://www.cnbc.com/2022/03/03/ukraine-raises-54-million-as-bitcoin-donations-surge-amid-russian-war.html

[8] https://qz.com/africa/1922466/how-bitcoin-powered-nigerias-endsars-protests/

[9]

[10] https://fee.org/articles/how-bitcoin-could-smash-socialism-in-venezuela/

[11] https://www.worldbank.org/en/news/press-release/2022/05/11/remittances-to-reach-630-billion-in-2022-with-record-flows-into-ukraine

[12] https://www.coindesk.com/business/2022/06/16/bitso-processed-1b-in-crypto-remittances-between-mexico-and-the-us-in-first-half-of-2022/

[13] https://www.coindesk.com/business/2022/07/29/two-soccer-teams-transfer-a-south-american-player-using-usdc-but-theres-collateral-damage/#:~:text=Andr%C3%A9s%20Engler%20is%20a%20CoinDesk,He%20holds%20BTC%20and%20ETH.&text=This%20week%2C%20S%C3%A3o%20Paulo%2C%20one,Nothing%20unusual%20there.