In this episode of Be[In]Crypto’s Video News Show, host Juliet Lima discusses emerging markets and how cryptocurrencies are playing a role in their development.
What is an emerging market?
Every day around the world goods and services are being produced and consumed in what we can largely think of as the global economy. Over time, but also through war and exploitation, some countries have developed sophisticated industrial economies that have raised wages and living standards for their citizens. However, not every country around the world has had the time, resources, or frankly leverage, to become an advanced economy, but some are certainly on their way.
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These countries we can think of as developing economies, or emerging markets. Features of emerging markets may include lower than average per capita income, or relatively frequent currency swings. However, many are currently undergoing rapid growth which offers high potential returns for investors, but also comes with a certain amount of risk. Without as much to lose as Western economies, emerging markets are willing to make more radical changes in policy for a chance at advancing. This has especially been the case with cryptocurrency adoption.
The most prominent emerging market taking on cryptocurrencies has to be El Salvador, which became the first country in the world to accept Bitcoin as legal tender in September last year. What started out as a small project called Bitcoin Beach in the sleepy surf town of El Zonte, eventually turned into a countrywide movement.
The project was spearheaded by President Nayib Bukele, a somewhat controversial figure who instantly gained international recognition with such a bold step. Moving nimbly, the small country announced its intentions in early June 2021 and was able to implement them by nearly the end of the summer. Although not everyone in the country is pleased with the development, many are supportive as they’ve seen their quality of life improve.
El Salvador, which adopted the U.S. dollar as its legal tender in 2001, has been beholden to U.S. monetary policy since then. With the new Bitcoin law in place, El Salvador now has more financial freedom, GDP has grown, and tourism has skyrocketed over the past year. The country is also working on other projects such as Bitcoin City, a tax-free bitcoin haven, which will be built at the base of a volcano. While the only country so far to adopt Bitcoin as legal tender, El Salvador has surely inspired other emerging markets.
Another country dabbling with crypto has been Costa Rica, albeit not in the entire country. In the region along the southwest pacific coast, areas such as Dominical and Uvita have recently taken El Salvador’s Bitcoin Beach idea and started something called Bitcoin Jungle.
While an official government law or program, some local businesses have taken it upon themselves to transact in Bitcoin. People can spend Satoshis over the lightning network instantly, without having to convert into the local Costa Rican colones.
Unlike El Salvador, Costa Rica has a long history of tourism, with people from all over the world bringing along their respective currencies. Therefore businesses in the area have been drawn to the idea of transacting in a currency that doesn’t have any borders, which is inherently international.
While El Salvador and Costa Rica may have based their Bitcoin projects on beaches and jungles, Guatemala has taken inspiration from its beautiful lake Atitlan, which is lined with idyllic towns, each idyllic in its own way.
The Bitcoin Lake project is primarily located in the town of Panajachel, also known as “Pana,” where currently 17 businesses in the area accept Bitcoin. The main goal of bitcoin lake is to provide an opportunity for Guatemalans in the area, with plans to fund the cleanup of Lake Atitlan using Bitcoin.
Although the government does not recognize Bitcoin as legal tender, doing so may benefit the local population, some 60-65% of whom lack a traditional bank account.
Inspired by El Salvador, Senator Indira Kempis of Mexico plans to introduce the bill later in 2022 that would make Bitcoin legal tender in her country. She argues that Bitcoin promotes financial inclusion, giving people access to banking products that they may not have otherwise been able to get.
It also provides them with a way to save that is relatively safe from inflation.
Other regions of the world have also been influenced to adopt cryptocurrencies, such as Africa. Based in the townships surrounding Mossell Bay, South Africa, Bitcoin Ekasi is another bitcoin beach. The project aims to help some of the poorest townships in the area realize the economic benefits Bitcoin can bring.
In addition to the usual list of financial freedom, and the ability to save in a deflationary currency, Bitcoin also has been helpful in another way. As most of the businesses in this area hold cash, the physical security of that cash can be an issue. Proper management of bitcoin private keys has helped alleviate some of this risk. Meanwhile, a substantial amount of stores are accepting Bitcoin in the area and the project is working on adding more.
The final place we’ll cover here is a very isolated island nation of Tonga, which has been mulling over crypto adoption. A prominent local figure, Lord Fusitu’a, has been hinting at plans for the country to accept Bitcoin as legal tender. He claims the earliest for something like this to come to fruition would be sometime in 2023.
The islands of Tonga have an excess of power with access to 21 different volcanoes, in addition to easy access to high-speed internet thanks to a plan enacted a few years ago by the government. If they do move forward with the legal tender status, Bitcoin mining could be done all over the islands, creating a massive amount of wealth through the use of their excess energy. With that wealth comes further development that would create new economic opportunities for their citizens.
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