Crypto Thrives Amid Economic Hardships – A Look at Troubled Economies

Crypto Thrives Amid Economic Hardships - A Look at Troubled Economies

Examining the growing demand for crypto assets on the ground in troubled economies, where inflation, currency instability, and restricted financial access are rampant.

In an era of political stagnation in the United States, while other regions are actively developing cryptocurrency frameworks, it is important to examine the growing demand for cryptocurrency assets on the ground.

Digital currency Demand Surges in Troubled Economies

As large countries face challenges like inflation, currency instability, restricted financial access, and growing digital currency awareness between their populations, the demand for these assets is growing. This demand is particularly whole lot of in countries like Pakistan, the world’s fifth most populous nation with over 239 Million people. Nonetheless, recent reports indicate that the Pakistani Government has firmly declared its stance against legalizing digital currencies to be able to avoid penalties from the Financial Action Task Force (FATF), highlighting the lack of trust in centralized institutions.

At 1st glance, this decision may  appear to be an overreaction to FATF’s stance on cryptocurrency, especially seeing as the organization’s recent call for regulation rather than an outright ban in their letter titled “An end to the lawless cryptocurrency space.”

Nonetheless, it is crucial to consider the complicated relationship betwixt Pakistan and the FATF. Just last October, Pakistan was removed from the FATF’s “grey list,” which designates countries with deficiencies in their anti-money laundering (AML) controls, potentially limiting their participation in worldwide finance.

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Along with that, ongoing discussions with the International Monetary Fund (IMF) regarding a bailout package further complicates matters.

The IMF has expressed unease with cryptocurrency markets in the past, and there were reports of applying crypto-suppression conditions during negotiations with Argentina. These factors likely contribute to Pakistan’s reluctance to embrace digital currencies fully.

Regardless of the government’s position, there is a thriving cryptocurrency adoption in Pakistan. It has been informed that people are actively converting their salaries into crypto stablecoins as a safeguard against the devaluation of their currency.

The Pakistani rupee has experienced a whole lot of decline of greater than 20 percent against the United States dollar year-to-date and over 30 percent in the past year. On the other side , Bitcoin (BTC) has seen a remarkable increase of 103 percent in rupee terms in 2023 (compared to 63 percent in United States dollar terms).

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It’s worth noting that, a 2022 report by forensics company Chainalysis ranked Pakistan Sixth universally in terms of cryptocurrency adoption, underscoring the growing interest in digital currencies within the country.

Moving to another troubled economy, Nigeria, the Sixth most populous country in the world with over 218 Million people, is expected to devalue its currency following the inauguration of the new president. The devaluation intends to alleviate trade imbalances and address dollar shortages.

Nigeria ranks eleventh in worldwide cryptocurrency adoption, signalling the country’s growing interest in digital currencies. Google Trends data likewise outlines that Nigeria leads in terms of searches for the term “crypto” and ranks Second for the term “bitcoin” in the previous 90 days.

This demonstrates the Nigerian population’s increasing curiosity and engagement with digital currencies as they seek financial stability and alternative financing opportunities.

Similarly, Turkey, with over 85 Million inhabitants and ranked as the 18th most populous country universally, faces whole lot of economic challenges. The country’s currency recently hit a record low as markets brace for the expected re-election of President Erdogan.

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Crypto Thrives Amid Economic Hardships - A Look at Troubled Economies

Cryptocurrency activity denominated in the Turkish lira has surged, surpassing euro-based activity, as illustrated by a chart from cryptocurrency market data company Kaiko.

Turkey’s position as the twelfth country in Chainalysis’ 2022 cryptocurrency adoption ranking signifies the growing interest in digital currencies as a means to hedge against currency volatility and diversify assets in a financially uncertain environment.

Uncovering Cryptocurrencies  Worldwide Appeal – Japan’s Pioneering Role and Surprising Adoption Patterns

Although while countries facing economic hardships show whole lot of cryptocurrency demand, even countries like Japan, the world’s eleventh most populous country with over 124 Million people and the third richest in terms of nominal GDP, demonstrate unexpected adoption trends.

Crypto Thrives Amid Economic Hardships - A Look at Troubled Economies

Japan, known for its low inflation and relatively stable currency, has resurfaced as a prominent player in the cryptocurrency space. Reports by James Butterfill, head of research at CoinShares, Japan leads in growth of spot volumes on cryptocurrency exchanges. It has the second-highest average daily volume (after the U.S.) and has experienced approximately 55 percent growth year-to-date.

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The reason behind Japan’s increased cryptocurrency activity remains uncertain. It  can potentially be driven by speculative trading, seeing as the country’s low inflation and stable currency. Nonetheless, it is likewise plausible that investors in Japan are anticipating higher inflation and currency instability, prompting them to seek digital currencies as a hedge. Still, the  capacity for price hikes to counter inflation can potentially strengthen the yen, raising questions about the role of Bitcoin (BTC) as a hedge in Japan.

Beyond the countries discussed, there are numerous examples of citizens worldwide turning to digital currencies to guard themselves against local currency volatility and debasement. Countries like Ukraine, Argentina, and Lebanon stand out as prominent examples.

Even though these individuals face challenges related to the lack of reliable onramps and custody solutions, they remain relatively unconcerned about the regulatory hostility seen in the United States.

These instances emphasize that while the  United States possesses the largest financial market universally, the purpose of digital currencies extends far beyond mere speculation. Developing economies, accustomed to regulatory authorities limiting financial freedom, find the decentralized nature of digital currencies easier to understand and appreciate compared to individuals living in more open regimes.

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The growing demand for digital currencies across diverse economic landscapes underscores the need for a broader understanding of their significance and potential impact on traditional financial systems.


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