Crypto as the ‘future of money' in inflation-stricken nations

Citizens of devalued currencies “need” crypto. “Nice to have” in the developed world.

According to Gemini's 2022 Global State of Crypto report, cryptocurrencies “evolved from what many considered a niche investment into an established asset class” last year.

More than half of crypto owners in Brazil (51%), Hong Kong (51%), and India (54%), according to the report, bought cryptocurrency for the first time in 2021.

The study found that inflation and currency devaluation are powerful drivers of crypto adoption, especially in emerging market (EM) countries:

Between 2011 and 2021, the real lost 218 percent of its value against the dollar, and 45 percent of Brazilians surveyed by Gemini said they planned to buy crypto in 2019.

The rand (South Africa's currency) has fallen 103 percent in value over the last decade, second only to the Brazilian real, and 32 percent of South Africans expect to own crypto in the coming year. Mexico and India, the third and fourth highest devaluation countries, followed suit.

Compared to the US dollar, Hong Kong and the UK currencies have not devalued in the last decade. Meanwhile, only 5% and 8% of those surveyed in those countries expressed interest in buying crypto.

What can be concluded? Noah Perlman, COO of Gemini, sees various crypto use cases depending on one's location. 

‘Need to have' investment in countries where the local currency has devalued against the dollar, whereas in the developed world it is still seen as a ‘nice to have'.

Crypto as money substitute

As an adjunct professor at New York University School of Law, Winston Ma distinguishes between an asset used as an inflation hedge and one used as a currency replacement.

Unlike gold, he believes Bitcoin (BTC) is not a “inflation hedge”. They acted more like growth stocks in 2022. “Bitcoin correlated more closely with the S&P 500 index — and Ether with the NASDAQ — than gold,” he told Cointelegraph. But in the developing world, things are different:

According to Justin d'Anethan, institutional sales director at the Amber Group, a Singapore-based digital asset firm, early adoption was driven by countries where currency stability and/or access to proper banking services were issues. Simply put, he said, developing countries want alternatives to easily debased fiat currencies.

“Inflation is one of the factors that has and continues to drive adoption of Bitcoin and other crypto assets globally,” said Sean Stein Smith, assistant professor of economics and business at Lehman College.

But it's only one factor, and different regions have different factors, says Stein Smith. As a “instantaneously accessible, traceable, and cost-effective transaction option,” investors and entrepreneurs increasingly recognize the benefits of crypto assets. Other places promote crypto adoption due to “potential capital gains and returns”.

According to the report, “legal uncertainty around cryptocurrency,” tax questions, and a general education deficit could hinder adoption in Asia Pacific and Latin America. In Africa, 56% of respondents said more educational resources were needed to explain cryptocurrencies.

Not only inflation, but empowering our youth to live better than their parents without fear of failure or allegiance to legacy financial markets or products, said Monica Singer, ConsenSys South Africa lead. Also, “the issue of cash and remittances is huge in Africa, as is the issue of social grants.”

Money's future?

The survey found that Brazil and Indonesia had the most cryptocurrency ownership. In each country, 41% of those polled said they owned crypto. Only 20% of Americans surveyed said they owned cryptocurrency.

These markets are more likely to see cryptocurrencies as the future of money. The survey found:

Will the Ukraine conflict impact adoption?

The poll was taken before the war. Will the devastating conflict slow global crypto adoption growth?

With over $100 million in crypto donations directly requested by the Ukrainian government since the war began, Stein Smith says the war has certainly brought crypto into the mainstream conversation.

A major success story like Mpesa in Kenya has influenced the continent and may help accelerate crypto adoption. Creating a plan when everyone you trust fails you is directly related to the African spirit, she said.

On the other hand, Ma views the Ukraine conflict as a sort of crisis check for cryptocurrencies. For those in emerging markets, the Ukraine-Russia war has served as a “stress test” for the cryptocurrency payment rail, he told Cointelegraph.

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The Pacific island state recognizes decentralized autonomous organizations.

The Republic of the Marshall Islands has recognized decentralized autonomous organizations (DAOs) as legal entities, giving collectively owned and managed blockchain projects global recognition.

The Marshall Islands' amended the Non-Profit Entities Act 2021 that now recognizes DAOs, which are blockchain-based entities governed by self-organizing communities. Incorporating Admiralty LLC, the island country's first DAO, was made possible thanks to the amendement. MIDAO Directory Services Inc., a domestic organization established to assist DAOs in the Marshall Islands, assisted in the incorporation.

The new law currently allows any DAO to register and operate in the Marshall Islands.

“This is a unique moment to lead,” said Bobby Muller, former Marshall Islands chief secretary and co-founder of MIDAO. He believes DAOs will help create “more efficient and less hierarchical” organizations.

A global hub for DAOs, the Marshall Islands hopes to become a global hub for DAO registration, domicile, use cases, and mass adoption. He added:

According to the World Bank, the Marshall Islands is an independent island state in the Pacific Ocean near the Equator. To create a blockchain-based cryptocurrency that would be legal tender alongside the US dollar, the island state has been actively exploring use cases for digital assets since at least 2018.

In February 2018, the Marshall Islands approved the creation of a new cryptocurrency, Sovereign (SOV). As expected, the IMF has criticized the plan, citing concerns that a digital sovereign currency would jeopardize the state's financial stability. They have also criticized El Salvador, the first country to recognize Bitcoin (BTC) as legal tender.

Marshall Islands senator David Paul said the DAO legislation does not pose the same issues as a government-backed cryptocurrency. “A sovereign digital currency is financial and raises concerns about money laundering,” . This is more about giving DAOs legal recognition to make their case to regulators, investors, and consumers.

Polyphony Digital has changed the game after apologizing in March.

To make amends for some disastrous downtime, Gran Turismo 7 director Kazunori Yamauchi announced a credits handout and promised to “dramatically change GT7's car economy to help make amends” last month. The first of these has arrived.

The game's 1.11 update includes the following concessions to players frustrated by the economy and its subsequent grind:

• The last half of the World Circuits events have increased in-game credit rewards.

• Modified Arcade and Custom Race rewards

• Clearing all circuit layouts with Gold or Bronze now rewards In-game Credits. Exiting the Sector selection screen with the Exit button will award Credits if an event has already been cleared.

• Increased Credits Rewards in Lobby and Daily Races

• Increased the free in-game Credits cap from 20,000,000 to 100,000,000.

Additionally, “The Human Comedy” missions are one-hour endurance races that award “up to 1,200,000” credits per event.

This isn't everything Yamauchi promised last month; he said it would take several patches and updates to fully implement the changes. Here's a list of everything he said would happen, some of which have already happened (like the World Cup rewards and credit cap):

• Increase rewards in the latter half of the World Circuits by roughly 100%.
• Added high rewards for all Gold/Bronze results clearing the Circuit Experience.
• Online Races rewards increase.
• Add 8 new 1-hour Endurance Race events to Missions. So expect higher rewards.
• Increase the non-paid credit limit in player wallets from 20M to 100M.
• Expand the number of Used and Legend cars available at any time.
• With time, we will increase the payout value of limited time rewards.
• New World Circuit events.
• Missions now include 24-hour endurance races.
• Online Time Trials added, with rewards based on the player's time difference from the leader.
• Make cars sellable.

The full list of updates and changes can be found here.

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