Bitcoin’s emerging role seems to be in absorbing fiat currencies, especially in areas of political and economic uncertainty. Countries like Venezuela have been hit hard by U.S. sanctions. The U.S. sanctions are not the only reason why Venezuela’s economy has been crippled. Corruption by its government and a sharp decline in oil prices play a vital role. Hyperinflation has also caused many Venezuelans to turn to bitcoin mining. Some people in Venezuela are even playing video games to earn bitcoin.
The IMF has reported that inflation levels in Venezuela are close to 700%. Apparently, the electricity in Venezuela is subsidized to the point that it is profitable to mine bitcoin or other cryptos. Venezuelan citizens are not the only ones who’ve turned to bitcoin. Argentina, Brazil, and Mexico have seen a dramatic increase in cryptocurrency activity. Although not nearly as severely as Venezuela, Argentina and Brazil are also suffering from inflation.
African countries like Zimbabwe are experiencing extreme political, economic, and social unrest culminating in a recent coup d’état. Zimbabwe’s own currency collapsed in 2009. U.S. dollars, South African Rands, and a few other fiat currencies are being used instead. People in Zimbabwe have more faith in bitcoin because even fiat currencies like the U.S. dollar are hard to come by. The circulation levels are extremely low.
It seems as if mining bitcoin in Zimbabwe is too expensive because of high electricity costs. Apparently, there aren’t too many options or exchanges serving Zimbabwe. Golix, perhaps the only legitimate crypto exchange in Zimbabwe, has seen demand skyrocket while supply is very limited. This is one of the reasons why bitcoin prices remain significantly higher in Zimbabwe compared to international markets.
The Golix company profile mentions that it is practically impossible to conduct international transactions for the average person in Zimbabwe. In cases where it is possible, maybe for the relatively well-off citizens, the process is described as “painful, time-lengthy, and expensive”. Unfortunately, rampant corruption, especially in the underdeveloped countries of the world has robbed the people of inalienable rights including financial freedom.
Extremely low salaries and exorbitant prices have inflicted the third-world countries with abject poverty. Even in countries like Pakistan which are comparatively much better off than the vast majority of African nations, the average yearly income of white collar workers is only $14,358. The fiat currency has been steadily declining in value against the U.S. Dollar and major international currencies. Although the majority of the population in Pakistan has not begun to adopt or take much interest in bitcoin or other cryptocurrencies, a new crypto called Pakcoin has been launched recently. Very few merchants are accepting it at the time of this writing, but these new initiatives might help pave the way for some sort of financial freedom and relief for the citizens of the third-world.
With the advent of globalization, availability, and accessibility of new technologies, it has become a lot of easier for people globally to conduct business. Digital currencies like Bitcoin could be the ultimate savior for dwellers of third-world countries, with the potential to be a lot more practical than local fiat currencies, especially when it comes to international commerce.