Decentralized nature, anonymity and privacy all add up to the growing popularity of cryptocurrencies over fiat currency technologies across the world. However, to some countries cryptocurrencies bring much more than that.

Encryption makes it almost impossible to track the location and identity of the users. Although some P2P exchange platforms like LocalBitcoin, Paxful, and Pisq show the country-specific trade volumes. The growth rates in developing countries such as Nigeria, Venezuela, Argentina, India, and Mexico, are among the highest. Why does that happen?

As we know, many cryptoexchanges, cryptofunds, and owners of cryptowallets are located in developed countries. For their citizens, crypto is a high-risk investment. Stable, government-backed local currency is often more attractive for households and low-risk investors.

Meanwhile in some developing countries, national currency is more volatile than Bitcoin and Ethereum. Their citizens actively use cryptocurrency to protect the value of their money against inflation and devaluation. People working abroad use Bitcoin for safe, easy and low-commission money transfers to family members, and to avoid currency import taxes. These facts show that cryptocurrency has an additional value for those in less developed economies compared to more developed ones.

Key advantages of cryptocurrencies in developing economies are presented below.

1. Security. Cryptocurrency is stored in wallet or cold storage. The total number of bitcoins is fixed, and Bitcoin will not depreciate due to inflation, unlike national currency. Stealing cryptocurrency is a very difficult task, which offers an advantage in developing countries where robbery is a major problem.

2. Zero fees. Many citizens of developing countries go to work abroad or in other cities. They transfer money to their families every month by Western Union or bank transfer (if the family has a bank account) but face very high bank charges and conversion fees (up to 20%). Cryptocurrency transfer have no fees, thus solving this problem.

3. Easy access to money system. Many citizens of developing countries do not have a bank account or credit card. However, many more people have smartphones with a mobile money account that can be included in the cryptocurrency system. It only takes a few minutes to open a cryptowallet; furthermore, doing so is completely free.

Now we would like to give some examples of countries where Bitcoin became popular and widespread.

1. Venezuela

Devaluation of the bolívar fuerte reaches more than 100% monthly. Bitcoin is a more stable currency, and it usually increases in value. It is forbidden to exchange bolivars for US dollars in Venezuela. Currently, the unofficial exchange rate is 24,000 bolivars to $1. In November 2016, the unofficial exchange rate was 1,500 bolivars per $1. As result of the long-term economic crisis, SurBitcoin became the most popular cryptoexchange in Venezuela. The population of Venezuela conducts money transfers in cryptocurrency, stores money in Bitcoin, and can make purchases in Bitcoin. Some shops accept only Bitcoin and money wires of foreign currencies, and thus the country may soon ‘Bitcoinize’ completely. Many startups like SurBitcoin, Cryptobuyer, and Tigo are very popular in Venezuela.

2. East Africa (Nigeria, Zimbabwe)

Cryptocurrency transfer systems are very popular among the population of East Africa. The most popular is BitPesa, which allows the user to send money to a mobile wallet. Many BitFinance users send online payments through the system. Despite the popularity of mobile wallet, according to Enhancing Financial Innovation and Access, more than half of the 17.5 million Nigerian adults received money via friends and family in 2014.

Bitcoin has become a good alternative to national currency because of the breakdown of the financial system in Nigeria, and a similar existed in Zimbabwe. In 2008, Zimbabwe experienced hyperinflation, which led to the closing of banks. Currently, 37% of Zimbabwe’s population uses cryptocurrency as a store of value.

3. Argentina

Instability of the national currency also influences the spread of cryptocurrency. The ban on converting the Argentine peso to US dollars was established a few years ago. At first, Argentines used loopholes; for example, they converted pesos to US dollars via PayPal, which was later prohibited. Currently, Bitcoin is a more attractive currency and store of value than the peso. Over 150 companies in Buenos Aires accept Bitcoin (including Uber and Subway). The non-profit organization Bitcoin Argentina works in Buenos Aires. It cooperates with universities to produce information about cryptocurrency. Moreover, a large cryptocommunity is present in Argentina, and numerous meetups take place here.

4. India

Bitcoin expansion in India became possible as result of a policy of demonetization. The government opened discussion to the society about cryptocurrency during the official forum MyGov. Most of the participants were interested in implementation of cryptocurrency in trading and financial activities.

Bitcoin has a wide range of usage in India: First, it is a store of value; second, it is used for internal money transfers (traditional transfers have a waiting period of a few days and about a 10% fee); third, it makes P2P payments and online purchases possible.

The cryptoexchange Unicoin set a new record for the Indian cryptoindustry at $1.5M per A-round of investment. India’s leading Bitcoin exchange Zebpay raised $1 million in 2016.

As we can see, failures of national currencies build trust in cryptocurrency, which grows in popularity, has a wide range of advantages, and can claim to be the main currency in developing countries.

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