Unstable Governments Adopting Cryptocurrency: What Does it Mean?
Despite the newness of the industry, blockchain and cryptocurrencies have already begun to prove themselves as ideal solutions for solving many pressing commercial and social problems.
Most prevalent in today’s conversations is using cryptocurrency to replace existing fiat tender, and the world already hosts several examples of governments embracing cryptocurrency in an attempt to revitalise struggling economies, upgrade their government systems and, in some cases, to simply gain revenue through the Bitcoin revolution.
Venezuela Launches National Cryptocurrency: Petro
In February 2018, Venezuela launched its national cryptocurrency, Petro, as a way to circumvent US sanctions and promote international trade. Supposedly backed by Venezuela’s oil and mineral reserves, Petro offers a solution to Venezuela’s crisis by allowing the government to take the economy back into their own hands in an attempt to drive investments into the country with Petro instead of US dollar.
Venezuela’s Dire Economic Crisis
The Venezuelan economic crisis began in 2012 due to an over-reliance on oil prices, which account for around 95% of the nation’s export earnings. After oil prices dropped suddenly in 2014 and the government hastily printed more money and raised the minimum wage, Venezuela was catapulted into a dire economic situation, with inflation reaching 18,000% in April 2018. This has created the perfect environment for the adoption of cryptocurrencies, with citizens embracing crypto mining, as well as investments in crypto as a means of storing wealth in a comparatively stable way.
Circumventing Western Sanctions
According to a statement by President Maduro, Petro brought the country $735 million within its first day on the market. However, the ultimate success of this endeavour is still to be determined, with the US Treasury advising that investors should ‘approach Venezuela’s proposed “Petro” cryptocurrency with caution,’ as it could intervene with the US-imposed sanctions on Maduro’s government. But this is not to say that other nations will avoid engaging in this initiative, especially as Venezuela is offering steep discounts on exports to encourage trade in Petro.
Cryptocurrency to Store Wealth
Despite its uncertainty, the introduction of Petro raises profound questions about the future of governance, and what power citizens have independently. Cryptocurrency equips people with a stable place to store their wealth, away from government manipulation. The use of cryptocurrency is increasingly popular, with Bitcoin and Dash fighting for the top position regardless of the government-backed Petro.
Although the Venezuelan government is at fault for their country’s current economic devastation, their willingness to embrace emerging technologies is exciting and promising in regards to the potential crypto has to liberate citizens of developing nations.
Zimbabwe Embraces Bitcoin Over National Dollar
We have seen conditions similar to Venezuela in countries such as Zimbabwe, where inflation has reached unbearable levels.
In 2008–2009, the people of Zimbabwe lost vast amounts of personal savings in the global economic crisis, leaving citizens to seek alternative solutions to this devastating situation. Cryptocurrency usage in Zimbabwe has boomed since then, with the price of Bitcoin at nearly twice the global rate.
Citizens of Zimbabwe have expressed the belief that cryptocurrency is more trustworthy than local banks, as it’s much more difficult to steal or devalue the price artificially. Aside from protection against hyperinflation, cryptocurrencies have made it possible for the people of Zimbabwe to engage in international trade deals, which was unfathomable with Zimbabwean dollar. This growing trust in alternative methods was evident when the price of Bitcoin rose dramatically in local exchange markets following the coup d’état.
Russia’s CryptoRuble Announcement Inspires Trend
Russia is also planning to introduce a national cryptocurrency, with the announcement of the CryptoRuble in October 2017. Similar to Venezuela, Russia is also under heavy sanctions imposed by the West. If either of these initiatives proves to be successful, we may start to see a trend emerge in nations such as Turkey, Iran, and North Korea, who also face problems attracting foreign investment due to government instability, sanctions, and restricted cash flow.
Turkey to Launch Turkcoin For New Revenue & Trade
Despite its status as an emerging economy, the Turkish government is also in the process of introducing a national cryptocurrency, Turkcoin, to ‘generate revenues from the cryptocurrency market’. 18% of Turkish people now own crypto, compared to the European average of 9%. As trust in their national currency, lira, flails, Turkish citizens are looking for new ways to do business internationally.
Although it will undoubtedly be used to encourage international trade, there is some speculation that the introduction of Turkcoin and support of other cryptocurrencies is ‘un-Islamic’ as they cannot be audited and surveyed which, according to Turkey’s Directorate of Religious Affairs, leads to money laundering and illegal activities. Like the others, it is too early to tell what influence this will have on the economic situation in Turkey, as well as if it stands as a viable option and not just a trend for insecure governments.
Is Crypto’s Prevalence in Unstable Nations Detrimental to Global Adoption?
Currently, the only existing cases of governments creating national cryptocurrencies happen to be ones that lean towards dictatorships, rather than those that are more established or democratic. This is revealing of the issues we face with the adoption of cryptocurrency on a global scale. Although it is not only authoritarian governments who are eager to embrace cryptocurrencies, their popularity is perhaps tainted from a reputation of being useful to those that are already unstable, rather than as a way for developed societies to advance.
It is difficult to predict if the application of cryptocurrencies will successfully aid citizens of developing nations, whether that’s through a national cryptocurrency or through other means. However, we do know that crypto has the potential to open doors for upgraded international trade and supply chains, as well as a way for citizens to store their wealth away from government manipulation.
Sea Foam Media is a blockchain, ICO & STO agency headquartered in San Francisco, with representation in New York and London. I currently work for their London office helping drive new media and marketing efforts for our clients.
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