Will Crypto Expansion Continue in Emerging Markets This Year?
Emerging markets have been at the forefront of massive growth in global cryptocurrency adoption over the past year. With this growth widely set to continue through 2022, a range of countries will see their crypto markets mature or expand. As OBG detailed at the time, the outbreak of Covid-19 has spurred a massive expansion in the use of cryptocurrency in a number of emerging economies.
For example, Nigeria – Africa’s largest cryptocurrency market – was the top country in the world for cryptocurrency adoption in 2020with Vietnam and the Philippines ranking second and third respectively.
Global cryptocurrency growth continued throughout 2021.
By the end of the year, the total market capitalization of the segment had increased by 187.5%, while the entire market was worth a total of $2,000,000,000.
Meanwhile, according to leading research firm Chainalysis, global adoption had jumped more than 880% year-over-year in August.
Throughout 2021, the fastest adoption rates were again seen in emerging markets. In Chainalysis’ annual ranking, Vietnam, India and Pakistan were first, second and third respectively, while the United States was the only mature economy in the top 10.
Brazil – which came in at number 14 – offers a case study of how emerging economies have sought to leverage crypto in 2021.
In terms of traditional financial markets, the Brazilian Stock Exchange has launched three exchange-traded funds (ETFs) dedicated to crypto. Meanwhile, in the first quarter of this year, the country will also see the launch of the world’s first ETF dedicated to decentralized financial networks.
In terms of institutional buy-in, the central bank announced that it will continue to work to integrate blockchain technology into its services, through a series of tests carried out internally by a dedicated team. He also unveiled plans for a central bank digital currency, which could launch as early as 2023.
On the legislative front, the Brazilian congress in December approved a bill establishing criteria for the regulation of cryptocurrencies in the country.
Finally, in terms of popular culture, crypto has started to become ubiquitous. To take an example, local market Mercado Bitcoin – one of Latin America’s crypto unicorns – has partnered with top football clubs in the expansion of “fan tokens”, while the token market non-fungible has also gained a foothold, notably through its adoption by music. stars like André Abujamra and Zeca Baleiro.
Naturally, different emerging economies will continue to integrate blockchain-based technology in their own way. But the Brazilian case reveals how crypto can permeate a national economy.
Cryptocurrency in 2022
According to research firm Tellimer, the current phase of decentralized digital currency evolution is defined by the focus on blockchain scalability, sustainability, governance, and interoperability. Tellimer called this phase “Crypto 3.0”.
Key features of “Crypto 3.0” have made the technology even more attractive and useful in emerging markets. For example, advances in scalability have reduced transaction costs, thereby expanding access. However, it was the increase in interoperability that proved particularly crucial.
According to Chainalysis, many cryptocurrency users in emerging markets use peer-to-peer (P2P) networks. Indeed, emerging countries are responsible for most P2P cryptocurrency transactions.
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For example, between April 2019 and June 2021, the regions of Latin America and Central and South Asia were together responsible for the majority of global P2P traffic.
P2P networks make it possible to buy and sell cryptocurrencies via mobile devices, which means they can be traded in regions with limited ICT infrastructure or by people who do not have access to a computer.
This is what makes P2P key to its adoption in emerging markets. For example, Statista noted in 2020 that the existing prevalence of mobile-based P2P payments was what initially prompted many Nigerians to explore cryptocurrencies.
In light of this and other considerations, many anticipate that the use of cryptocurrency will grow in emerging markets in the future.
Indeed, there are already signs of the form this expansion could take in different economies.
In December last year, for example, it was announced that the Dubai World Trade Center would become a crypto zone and a regulator for cryptocurrencies and other virtual assets.
Elsewhere, last year, the Philippine Stock Exchange also announced that it was looking to become a crypto asset trading platform. However, he is still waiting for the authorities to issue rules regarding crypto trading.
However, crypto is not without its detractors. In late January, Tobias Adrian – head of the IMF’s Monetary and Capital Markets Department – told the Financial Times that cryptocurrencies were causing “destabilizing” capital flows in emerging markets.
The IMF also recently urged El Salvador to reverse its decision – made in September last year – to become the first country to accept Bitcoin as legal tender.
Another concern centers around the colossal ecological footprint of cryptocurrencies related to the proof-of-work concept popularized by Bitcoin. However, many less energy-intensive cryptocurrencies have been developed using proof-of-stake or proof-of-space concepts, which negate the need for concentrated “mining” activities that require huge amounts of electricity. . As the global momentum behind the zero-carbon transition builds, the pace of innovation in the green cryptocurrency space is set to accelerate further.
By Oxford Business Group
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