Cryptocurrencies can play a role in emerging economies’ recovery from the pandemic and its related impacts that can push digital transformation, including digital payments, forward significantly, Oxford Business Group said in a new report released on Wednesday.
According to the report, US-based Tesla announced early February that it had bought the equivalent of $1.5 billion of Bitcoin, which has been witnessing a heavy demand recently, and it announced its plans to start accepting Bitcoin as payment for its products.
On Sunday, Bitcoin reached a new high-water mark of $58,332, making its year-to-date gain more than 100 percent, rising by 305 percent over the course of 2020, according to the report.
Adopting cryptocurrencies is supported by two trends, according to the report, including people’s heavy hedge to online shopping and avoiding physical cash, as well as investors who are looking to hedge against inflation, as governments ramp up spending and central banks print more money in an attempt to stimulate economic activity.
“Some have even gone so far as to argue that the rise of crypto is the beginning of the end for sovereign currency systems”, according to the report.
The report also said that cryptocurrencies can be the most advantageous instruments to transfer funds globally, revealing that there has been an uptick in their use in sending remittances.
The report cited Statista data that shows that Nigeria was the leading country for Bitcoin and cryptocurrency adoption in 2020 owing to the increasing demand for it in remittances transfer.
Moreover, cryptocurrencies can be bought and sold remotely using mobile devices, which leaves room for them to be traded in regions that lack an ICT infrastructure or by people who do not have access to a computer, according to the report.
It also noted that cryptocurrency is increasingly used by freelancers to receive payments across borders for outsourced work, adding that this could lead to an increase in digital nomadism and accelerate the spread of Bitcoin and related technologies in emerging economies.
Cryptocurrencies can be a safe asset in countries that suffer political or economic instability and in case of applying currency devaluation.
“While, for consumers from developed economies, crypto is a largely speculative investment, for some investors in emerging economies, it actually constitutes a more reliable option than traditional currency”, said the report.