Right from its inception, Bitcoin’s development has been quick and promising. The world was quick to recognize its disruptive nature and Bitcoin’s adoption became fluid. While the status of Bitcoin as an adaptable universal currency still remains ambiguous, it surely has proven its utility. For economies that have been struggling, people have sought to Bitcoin as an alternate in more occasions than one. Let’s look into the situations where Bitcoin actually did better than just saving face in times of crisis:
Fears of Greece exiting Eurozone or Grexit:
In 2015, Greece was in severe recession and in a debt of nearly 1.5 billion euros to creditors. Defaulting on timely payment of the credit might have resulted in Greece leaving the Eurozone. The fears looming the Grexit prompted people to look for alternative methods to pay for Goods and Services. With the local currency inflating at phenomenal rate, there was a clear uptick in the Bitcoin trading. This was a direct result of people investing in Bitcoin so as to hold value against their currency.
As an alternate to monetary reforms enforced, most cryptocurrency supporters argued that Greece could have opted a digital asset model. That is Government could have used decentralized currency to pay pensioners and Government servants initially. Government assets would back this currency and hence can be repaid later. Though Greece took a different path, it is evident from trading volumes that people took to Bitcoin in the time of crisis.
Argentina and Financial repression:
Argentina has experienced the crippling effects of 2008 housing collapse and continued to feel the jitters even in the next decade. Amid the downward spiral of economic decline, the government announced stringent financial restrictions in 2011. This restricts people from buying foreign currency and to send money overseas. This financial repression made some Argentineans to adopt the cryptocurrency as an escape route from government controls.
A pleasant Government change has lead to revoking of reforms, accommodating better policies to save the country. While the economy is recovering, there is an increase in volume and number of companies operating with Bitcoin. While Bitcoin has supported people during the repressive phase, let’s see how it would help Argentina to reconstruct its economy.
Brazil and Kenya:
Brazil is the world’s largest exporter of soft commodities and it has been in recession for over three years. With its economy weakening, the exporters aren’t getting good value for their exports. Hence they have resorted to payments in bitcoin so as to maintain their value of profits. This resulted in the increased volumes during the harvest period of the soft commodities crop cycle.
Kenya has a high population of unbanked citizens and high micropayment transactions in mobile systems. While Government is tightening its hold on local businesses through tax monitoring, Bitcoin is instrumental in building a regulated system. Major wallets like Bitpesa are actually helping the Government to setup a regulated system. This would allow the businesses to flourish and also be monitored for tax irregularities, if any.
Hence we can see that Bitcoin indeed has been crucial in strengthening or restructuring weak economies in many cases.
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