INSIGHTS ON GLOBAL CRYPTO ADOPTION

Cryptocurrency adoption is growing gradually across the world with the rise in knowledge about #crypto and #blockchain among institutions and private individuals. With this, Bepace is keen to explore what the current?adoption level is and what growth can we expect in the coming years. Although this question cannot be answered unambiguously, there is a certain spectrum of realistic expectations, defined by optimistic developments and interesting projects. Below are the details.

Cryptocurrencies are the first and the most developed application of blockchain technologies. They create money without central banks and facilitate payments without financial institutions. Designed for peer-to peer transactions, these latest financial innovations put competitive pressure on transaction methods by existing financial institutions. Cryptocurrencies have various design goals, and we cannot mention them all exhaustively because new #cryptocurrencies are being created every week.

However, the current common denominators for creating a cryptocurrency are:

(1) to provide a currency alternative to cash (Bitcoin, Montero),

(2) to support peer-to-peer trading activity with tokens (RMG and Maecanas),

(3) to drive secure access to a product or service in peer-to-peer trading (Golem)

and (4) to underpin an underlying platform or protocol (Ether and NEO).

Cryptocurrencies have sparked strong reactions. Critics call them a bubble (Source: NY Times 2018), supporters predict that they ultimately replace money (Source: CNBC 2018). There is less disagreement about the underlying blockchain technology, a protocol to achieve decentralized consensus about the validity of a common database, stored in different locations. The reason is that many recognize that the blockchain protocol can lead to safe information systems without any administrator.

Whatever the future brings, cryptocurrencies and blockchain protocols are part of a tidal wave of new technologies that are changing the way production and commerce are organized. Indeed, the number of active users of crypto around the world has doubled in the past year alone. The 2022 Global Crypto Adoption Index by Chain Analysis even claims that global crypto adoption has grown by over 88 percent in the last year. Platforms for peer-to-peer (P2P) communication have contributed to the increase in bitcoin use, especially in emerging markets. Moreover, Finder.com suggests roughly 27 million Americans own cryptocurrency, 44.5 percent of whom own bitcoin. The percentage of Americans who own cryptocurrency has not yet reached 10 percent of the total population, but it has been on a steady incline since the inception of Bitcoin in 2009. Also, the data from the World Bank show that global adoption leveled off in the last year after growing consistently since 2019. The data suggests that many of those attracted by rising prices in 2020 and 2021 stuck around and continued to invest a significant chunk of their assets in digital assets.

Overall, thorough research conducted by the World Bank has concluded that the adoption of cryptocurrency is much like the adoption of any other technology: the rate at which adoption occurs grows very gradually until about 8 to 10 percent, then generally explodes upward to mass adoption from there. (Source: Our World in Data)

According to the Chief Economist update from the World Bank group, the use of cryptocurrencies intensifies as the investments in mining capacity increase and investments in blockchain technologies surge. Governments in Europe and Central Asia have been experimenting with blockchain to improve their services. Some central banks study the issuance of legal tender in the form of digital currency, and financial institutions try to pilot blockchain applications to incorporate them into the existing financial structures. Switzerland is at the forefront of modifying financial regulations to cover initial coin offerings (ICOs), ensuring that they are integrated into the existing financial architecture rather than developed as an outside alternative (Source: Financial Times 2018). This country aims to become a cryptocurrency and blockchain hub. For example, Sirin Labs raised $157 million for the development of a blockchain-based smartphone. Another Swiss foundation, advised by Jacob Frenkel, chairman of JPMorgan Chase International, and Nobel laureate Myron Scholes, raised $50 million to develop a cryptocurrency backed by Special Drawing Rights (SDR). Saga would have a stable value and be integrated into the existing financial sector, including anti-money-laundering checks, with deposits in the International Monetary Fund’s SDR holdings. France is also planning a regulatory framework for ICOs. Other European governments are accumulating in-house experience with blockchain pilots to improve government services. Estonia, Georgia, and Ukraine have experimented with blockchain to set up land and real estate registries. They are still searching for more specialized and efficient designs, but the experiments have given a boost to efforts to digitize government services.

On the other hand, small countries with a supportive business climate may explore cryptocurrencies as an interesting alternative. The mining of cryptocurrencies is surprisingly widespread in Georgia, thanks to tax exemptions and low electricity prices. Indeed, Georgia has had the fastest-growing electricity consumption per capita in all of the ECA since 2009. (Source: World Bank) In general, cryptocurrency mining thrives in a cold climate (avoiding the need for cooling) and in areas where electricity costs are low. Mining farm projects can also be found in Iceland, Sweden, Russia, and Lithuania.

Lack of trust in existing financial intermediation makes cryptocurrencies an interesting alternative in some countries. According to Chainalysis, users from lower-income countries tend to choose cryptocurrency to send remittances, protect their savings in times of economic crisis, or satisfy their financial demands. Bitcoin and stablecoins are more preferred in these areas than others. A prime example is the Republica Bolivariana de Venezuela. Here, people seek alternatives for the bolivar, whose value has been eroded by hyperinflation, and also the officially introduced digital currency El Petro as many believe that the announcement of the creation of a national digital currency was populist. In countries like Ghana, India, Brazil, and China, rapid economic growth has overwhelmed national infrastructures. In many cases, cryptocurrency offers an obvious solution. In Nigeria, for example, the World Bank estimates a paltry 5.4 banks per 100,000 adults, compared to 24 per 100,000 in the European Union. Consequently, there are roughly 118 million Nigerians without a bank account, meaning that only 40 percent of the population has access to basic financial services. When we compare this to the 46 percent of the population who has regular internet access, we can see why digital currencies are having such a big impact in emerging markets.?(Source: Coin Offering)

Cryptocurrency continues to attract attention, mainly in Latin America, where, in June 2022, El Salvador made new changes to the payment policy. By order of the President, bitcoin became legal tender in order to fight "cash corruption". The claim is that, using blockchain technology, local governments and institutions in emerging markets can now track all money that is being spent.

From all these trends, one could easily rank countries in Latin America or Africa by raw cryptocurrency transaction volume, which would give you a straightforward view of where the most cryptocurrency activity is happening. However, when research looks at numbers showing where individual, non-professional investors embrace digital assets the most in several categories (centralized service value received, retail centralized service value received, P2P exchange trade volume, DeFi value received, and retail DeFi value received), the surprise winner is Vietnam. A look at the sub-rankings from Chainanalysis and similarly from Statista shows that Vietnam shows extremely high purchasing power and population-adjusted adoption across centralized, DeFi, and P2P cryptocurrency tools. Other sources have also noted Vietnam’s interest in cryptocurrency. Polling done by the World Economic Forum found that 21 percent of Vietnamese consumers reported using or owning cryptocurrency. Vietnamese media suggest that cryptocurrency-based gaming, including games following the play-to-earn (P2E) and move-to-earn (M2E) models, is particularly popular in the Southeast Asian country. That goes not just for users, but builders too, as the top-grossing P2E game Axie Infinity is based in Ho Chi Minh City, with its success inspiring more crypto gaming startups to find success in Vietnam. Vietnam is also one of the world’s first countries to have an official Blockchain association - founded in May 2022 as the Vietnam Blockchain Association.?

Depending on what rankings we look at and what criteria we monitor, the above mentioned countries rank in different places. However, the common denominator is that countries such as Vietnam, Pakistan, Ukraine, Russia, Turkey, India, Switzerland, Great Britain, the USA, and China are among the top 10 adopters of cryptocurrencies.?The data also concludes that a critical mass of new users have put capital into cryptocurrency either because they do not trust centralized financial exchanges or because they want to stay at the forefront of innovation, even in the world of traditional finance.

There are multiple approaches to meeting the challenges of digital currencies. One of them is that national governments strive to create central bank digital currencies.?Central banks are exploring the possibility of issuing digital money, for several reasons. Firstly, the use of traditional cash is steadily declining. Secondly, cryptocurrencies have provided a working digital alternative to cash, replicating the original characteristics of cash in digital format.

Although the central bank digital currencies may be launched within the next decade, we presume that a certain amount of digital literacy is required before they can be rolled out mainstream. This further shows the benefit of educating yourself and your business on digital money today. Although cryptocurrencies and central bank digital currencies are likely to work differently, many of the fundamentals may appear to be the same. For example, payments will be likely made via digital wallets on your smartphone. Much like cryptocurrencies, independent financial technologies will be built around the central bank digital currencies, rather than within traditional financial institutions like banks.

#crypto?#predictions2023 #adoption #compliance?#blockchain?#blockchaintechnology?#blockchaintech?#bitcoinnews

At?Bepace, we recommend using good knowledge of cryptocurrency strategies. Developing the proper technique for reading cryptographic charts is an important skill to cultivate.?

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