Since its launch in 2009 by the pseudonymous Satoshi Nakamoto, bitcoin (BTC-USD) has established itself as a household name, thanks to growing awareness surrounding its use and the publicity of its potential, helping cement itself as the largest cryptocurrency by market capitalization. Despite the limitations of the earliest blockchain network and the price per coin, growth atop the network (namely user adoption rates) is still rapid, especially in emerging economies.
Recent reports indicate that bitcoin’s global adoption rate jumped by 880% between 2020 and 2021. The greatest pace of adoption lies primarily in emerging markets, especially those constantly grappling with high inflation and limited access to traditional financial services. Between 2021 and 2022, several developing economies across Africa, Southeast Asia, Latin America, and the Middle East have embraced BTC as more than a store of value.
To explore these trends in greater depth, we sat down with AAX cryptocurrency exchange’s Head of Research and Strategy, Ben Caselin. Our conversation sheds light on how bitcoin is shaping new economic standards in emerging markets and why BTC will disrupt financial models in the years to come.
AAX’s latest report underlines a surge in bitcoin adoption across developing countries. What, according to you, are some of the potential reasons for the growing adoption of bitcoin in developing countries?
Ben: Unlike in developed markets where banks generally get the job done and most people have a sense of financial security, the reality in many emerging markets is vastly different. For instance, in places like Turkey, where the lira has suffered inflation for over three decades, bitcoin and stablecoins provide an escape route and a way to keep savings from evaporating.
Similarly, in a place like El Salvador, many households rely on money sent from abroad. Rather than Western Union (NYSE: WU) or other money operators, transacting funds over the bitcoin network saves people a lot of money and can even serve those who don’t have a bank account but do have a smartphone.
How do you see bitcoin adoption evolving across developing countries over the next few years? Do you see any geographical trends that stick out?
Ben: At a local level, we will absolutely continue to see increased usage of bitcoin and digital assets for everyday transactions and basic money management. We may also see more integration at a national or regional level around trade, interbank settlement, and remittances.
The way adoption takes shape in emerging markets is important for the way bitcoin and digital assets are treated in more developed economies as well – as use cases become apparent and the distribution of bitcoin continues to occur, we should see decreased speculation as well.
Other than BTC, what other cryptocurrencies do you think will be popular in developing countries?
Ben: Generally, stablecoins pegged to the U.S. Dollar, such as USDT, remain important in emerging markets, especially in South America, where the U.S. Dollar is preferred and used as a store of value.
Other projects such as Ethereum (ETH-USD), GameFi tokens, or even meme coins may be particularly popular in certain markets, but these are mostly market hype. In contrast, bitcoin adoption is of a slightly more serious nature, for example, around Corporate Treasuries, national reserves, day-to-day communities, and small businesses.
What are some barriers to cryptocurrency adoption in the context of emerging economies?
Ben: While smartphones are more widespread than, say, most traditional financial services, that does not mean that the adoption of bitcoin and digital assets can be taken for granted. It’s going to take a lot more education and innovation alongside collaboration with stakeholders at all levels of society to get to a point where bitcoin is ubiquitous.
How can crypto exchanges help lower these barriers that prevent developing economies from adopting cryptocurrency and blockchain technology?
Ben: For us at AAX, really taking emerging markets as our key markets have meant building a presence, and so we now have offices in Nigeria, Brazil, Taiwan, Vietnam, and other places.
On the one hand, it’s about providing the necessary solutions that enable people to participate in the crypto ecosystem – building out the necessary fiat on and off ramps, Lightning, simple KYC procedures, enabling quick withdrawals, etc. Once users are onboarded – whether for trading, savings, or general money management – it’s about providing the necessary education to build a deeper engagement with digital assets.
On the other hand, it’s about engaging the wider public, seeking out partnerships, and advocating for bitcoin and digital asset adoption in all the right places because, in the end, a lot more can be achieved if support is widespread – El Salvador’s bitcoin story provides a case in point.
How is AAX helping the less tech-savvy users enter the world of cryptocurrencies?
Ben: Next to our regular trading app, we will also be launching a simplified light version that focuses more on savings and informed money management rather than active trading. We will share more about this towards the end of September.
