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Which Countries Are Adopting Cryptocurrency?

Bitcoin adoption by countries, from El Salvador to Nigeria

In the early years of the industry, it was a utopian scenario for Bitcoin (BTC) to become the legal tender of a country. Indeed, a development like this seemed super unrealistic even 2-3 years ago.

However, when El Salvador adopted BTC as the nation’s official currency alongside the US dollar in a bold and ambitious experiment, this distant dream quickly became a reality.

Most importantly, the Latin American country’s case with Bitcoin paved the way for other governments that can potentially follow in its footsteps to integrate cryptocurrency into their economies to leverage the benefits of blockchain technology and digital assets.

In this article, we will explore seven different countries across multiple continents to see how they stand in respect of Bitcoin adoption. Can you guess which will be the first?

1. El Salvador

Despite the massive anticipation and the active participation of many prominent blockchain companies, El Salvador’s Bitcoin adoption did not go quite as planned on September 7, 2021, when the country’s BTC law went into effect.

In addition to “unplugging” the government-backed Chivo crypto wallet app due to technical problems on that day, multiple protests erupted and lasted for several days, caused by the mistrust of citizens opposing the state’s BTC law which requires businesses and merchants (except for the ones that do not have access to the necessary technology to do so) to accept the cryptocurrency alongside the USD.

For these reasons, El Salvador’s Bitcoin implementation has been criticized by not just the IMF and the World Bank as well as the likes of S&P Global, but also crypto market players, such as Ethereum co-founder Vitalik Buterin. In a Reddit comment, in addition to calling it “reckless” to make a cryptocurrency legal tender without prior education, Buterin argued that forcing businesses to accept BTC “is contrary to the ideals of freedom that are supposed to be so important to the crypto space.”

While it’s hard to decide yet whether the way El Salvador chose to adopt Bitcoin was the right one, the country also has some positive developments in this field.

According to early October reports by Salvadorian president Nayib Bukele, over three million people have downloaded the Chivo wallet, which represents 46% of the population. Compared to only 29% of the citizens who had bank accounts in 2017, this number suggests that more people than before are utilizing the state-backed BTC wallet than banking services in the country.

That said, since the government gives $30 for every person who installs the app on their device, the number of active users may be much smaller. Although, it is also true that this statistic doesn’t account for the Salvadorians who utilize other wallet solutions such as Strike or the Bitcoin Beach wallet.

Furthermore, Bukele reported that in addition to using Chivo ATMs to buy more BTC than withdrawing cash, Salvadorians received 24,076 remittances via Bitcoin, worth over $3 million on October 16 alone.

At the same time, El Salvador has become the third country with the most Bitcoin ATMs in the world, after the US and Canada. While the government continues to buy the dip to acquire more BTC and has since started mining the cryptocurrency via volcanic energy, it has utilized the profits of its Bitcoin fund to build a $4 million veterinary hospital.

Most importantly, many of the technical issues of the Chivo wallet have been fixed, and businesses and financial institutions have started to embrace BTC payments in the country, in addition to the population.

As a result, while El Salvador’s case with Bitcoin adoption has been rather bumpy and chaotic at first, the government is actively working on improving its crypto infrastructure, which is crucial for the Latin American country’s crypto experiment to be successful in the long term.

At the same time, the state plans to make BTC gains exempt from tax in an attempt to attract foreign investment and to facilitate the development of the country’s cryptocurrency sector.

2. Laos

Unlike El Salvador, Laos has not been a crypto-friendly country for a long time. While the precise date is not entirely clear, the country banned commercial banks, businesses, and the public from buying, selling, or utilizing digital currencies for value transfers.

According to a report by the local media outlet Vientiane Times, the country’s central bank, Bank of the Lao PDR, prohibited the above cryptocurrency activities in October 2018 after warning the public against using digital assets in August.

Interestingly, the Bank of the Lao issued further warnings about crypto-related activities in May 2019 and August 2021 as well.

However, the Lao government launched a pilot program this September, in which it authorized six companies to trade and mine crypto. Moreover, if the trial ends successfully, many expect Laos to extend the legality of cryptocurrency activities to the general public and the rest of the enterprises.

While it may seem a surprise move at first glance, Laos’ newly adopted crypto-friendly stance makes great sense. As a landlocked country with nearly $14 billion of debt and limited abilities for development due to its mountainous terrain and longer distances from seaports, the Asian country has abundant access to hydroelectric power from the Mekong River.

With a massive capacity of clean energy – that is more than enough to serve its population (it’s one of the country’s most important export products) –, Laos identified an excellent opportunity in cryptocurrency mining that can convert power that would otherwise be wasted.

This opportunity became even more lucrative after China’s crackdown on crypto mining and trading, offering the chance for Laos to encourage miners to move their operations from a country where it is banned to a country where they have access to cheap and clean electricity, inexpensive real estate, and special economic zones.

3. Switzerland

Switzerland is clearly one of the most crypto-friendly countries in the world and also one of the first to adopt it.

Identifying the benefits of digital assets since the industry’s early days, the European country created an effective regulatory framework around blockchain technology and cryptocurrencies. As a result, Switzerland attracted numerous prominent cryptocurrency projects, such as Ethereum, ShapeShift, Aave, Cardano, Solana, Cosmos, Tezos, Polkadot, and even Facebook’s Diem (formerly Libra) project.

A key highlight in Switzerland is Zug, a smaller municipality with a total population of around 31,000 that has increasingly experimented with decentralized ledger technology (DLT), such as a blockchain voting trial and accepting tax payments in digital assets.

Known as “Crypto Valley” for most, Zug is the largest hub for blockchain and digital asset companies in the country, serving as the base for 433 organizations out of the total of 960 across Switzerland and Liechtenstein (February 2021 data).

According to the above report, the valuation of the top 50 blockchain companies in the Swiss Crypto Valley surged from $37.5 billion in July 2020 to nearly $255 billion by February 2021 (680% growth). At the same time, the number of employees has grown from 4,780 to 5,184 throughout the same period.

The reason behind Switzerland’s success in figuring among the leading cryptocurrency hubs in the world can be attributed mainly to the government’s open mind towards digital assets and emerging technology like the blockchain, which Swiss policymakers leveraged to gain a first-mover advantage in terms of regulating the space.

While Switzerland’s regulators were one of the first to publish guidance on Initial Coin Offerings (ICOs) in 2018, lawmakers approved a comprehensive framework around blockchain technology that was introduced in two phases in 2021 (the first is already live).

Furthermore, while crypto is considered either as assets or as property in Switzerland (based on the rules of each canton), digital asset exchanges have to obtain a license to operate, and industry players are subject to local KYC, AML, and CTF requirements.

4. Portugal

As Lisbon’s startup scene is thriving, Portugal has adopted a pro-crypto stance to attract both individuals and businesses from the industry.

Despite some early criticism by Banco de Portugal, the country’s central bank, that highlighted the lack of supervision around the asset class and uncertainty in terms of taxation until 2017, the government decided to make cryptocurrency trading, investment, and mining by individuals exempt from all kinds of taxes, including VAT and capital gains tax.

As a result, casual traders, miners, and investors don’t have to report or pay any taxes after their crypto earnings. On the other hand, if you are engaged with these activities as a professional or a business, Portugal’s government will tax you in accordance with the country’s laws.

While Portugal lacks the comprehensive crypto framework of Switzerland, based on a 2017 law and a 2021 notice by the central bank, Banco de Portugal requires all digital asset businesses to obtain a license when carrying out the following activities within the country’s territory:

  • Exchange services between crypto and fiat and crypto-to-crypto
  • Digital asset transfer services
  • The safekeeping or administration of cryptocurrencies or assets that enable to control, store, own, or transfer them and their respective private keys

Despite the central bank’s limited supervision over crypto exchanges, it aims to regulate how industry players handle anti-money laundering and counter-terrorism financing.

In addition to the above measures, Portugal approved a Digital Transitional Action Plan in April 2020 that aims to incentivize innovation, entrepreneurship, and competition as well as establish the necessary infrastructure around these fields.

One of the most exciting parts of this action plan is the concept of technological free zones (ZLTs) that offer flexible regulatory provisions for businesses (including crypto and blockchain firms) to experiment with different technologies, innovative processes and features, as well as pilot programs.

5. Singapore

Ranked as the world’s most competitive economy by the World Economic Forum (2019 data) that features one of the highest GDP per capita on the globe, Singapore has been serving as a key financial hub in Asia for many fintechs, innovative startups, and also cryptocurrency businesses.

Although it has adopted a more conservative stance than El Salvador’s government, Singapore has taken a friendly approach towards crypto. While the Asian business hub has been actively working together with industry players to shape the country’s digital asset space, the developments around this field are backed by a set of regulatory laws and supervised by the Monetary Authority of Singapore (MAS).

Despite joining a large group of regulators globally in imposing increased scrutiny against the crypto exchange Binance due to its reportedly unregulated activities, the MAS has granted the first two full-fledged licenses to digital asset companies this October. One was granted to an Australian crypto exchange and the other to DBS’ brokerage arm, DBS Vickers.

At the same time, the MAS cooperates with the BIS Innovation Hub as well as the central banks of Australia, Malaysia, and South Africa to develop central bank digital currency (CBDC) prototypes for international settlements as part of an initiative called Project Dunbar.

In addition to the MAS’ chairman acknowledging the potential role of crypto in future finance “that extends beyond pure speculation,” Singapore scored surprisingly well in the Independent Reserve Cryptocurrency Index (IRCI) 2021.

Measuring the awareness, adoption, trust, and confidence in crypto in terms of the population, the Asian country scored 63, reflecting a progressive and positive attitude towards digital assets (for comparison, Australia scored 47 last year). The data revealed that 93% of Singaporeans have heard about crypto and 43% own digital assets, from which 74% reported an increase in their wealth via such investments.

6. Nigeria

Nigeria’s crypto adoption is a tough case.

Digital assets have long been in high demand within the African country due to several factors, including the inflation of the Nigerian naira (which was the 17th highest in 2020 worldwide), excessive banking fees, rising rates of unemployment, and a predominantly young, tech-savvy population that experiments regularly with digital technology to improve their life qualities.

However, it seems that Nigeria’s government has a different attitude towards cryptocurrency than citizens. While it is legal for the population to own, trade, and use crypto for payments, the Central Bank of Nigeria (CBN) ordered all financial institutions to close the bank accounts of digital asset users and businesses in February 2021.

Criticizing the (alleged) anonymity, untraceable nature, as well as the vulnerability to criminal abuse and terrorism financing – probably the real reason behind the central bank’s crypto restrictions is the fact that it has been working on finalizing Nigeria’s eNaira CBDC project – that was officially launched on October 25 after a slight delay.

Despite the ban, while many businesses have halted their operations or outright left the country, Nigeria’s cryptocurrency market continued to thrive. As the population utilizes peer-to-peer (P2P) exchanges to gain exposure to digital assets, Chainalysis’ 2021 Geography of Cryptocurrency Report ranked Nigeria as the sixth top country in terms of adoption by consumers.

It seems that the country’s financial regulator, the Securities and Exchange Commission (SEC) operating under the Federal Ministr of Finance, identified this trend, as it has since established a fintech division dedicated to studying crypto and blockchain to find ways to better protect investors.

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7. Ukraine

Ukraine is one of the newest members of crypto-friendly jurisdictions.

While digital asset enterprises had to do business within a regulatory gray area for quite some time, the country’s parliament passed a draft law on September 8, 2021, to legalize cryptocurrency and establish a legal framework for both foreign and national exchanges to operate.

Although Ukrainian president Volodymyr Zelensky has since returned the bill to lawmakers for revision, this move did not reflect the reversal of the country’s newly adopted pro-crypto stance but instead, the opposition to the idea of creating a separate watchdog to supervise the industry. Zelensky suggested that crypto regulation should be overseen by the National Commission on Securities and Stock Market.

While the National Bank of Ukraine (NBU) seeks to promote fair crypto regulation and sees many promising opportunities in the asset class, the deputy minister of the Ministry of Digital Transformation stated that the new bill would allow cryptocurrency payments to be allowed in a similar way as those derived from the USD.

At the same time, following the shutdown of illicit digital asset exchanges in August, Ukraine seeks to establish industry-standard anti-money laundering rules for cryptocurrency businesses to crack down on criminal activity.

It’s also important to mention Ukraine’s e-hryvnia project which has been under development since 2016. Interestingly, in one of the initiative’s newest updates, the Ministry of Digital Transformation has considered using the country’s CBDC to pay its employees as e-hryvnia’s first pilot program.

Unlike Nigeria and China, which restricted activities around decentralized cryptocurrencies ahead of rolling out of their CBDCs, Ukraine took an opposite stance, with the government not considering digital assets as a threat to the e-hryvnia’s success. Instead, Ukraine’s government leverages this opportunity to attract crypto businesses and investors through positive regulation.

Global Crypto Adoption Is Rising, and It Won’t Stop Anytime Soon

Crypto regulation was nearly non-existent a few years back, with many countries opposing the technology and criticizing the speculation, hype, and fraud targeting the industry.

At the same time, many businesses, high-net-worth individuals, and financial institutions refrained from gaining exposure to the asset class. However, there is a major shift in attitude taking place, in which some traditional finance institutional giants like JPMorgan Chase – where its CEO Jamie Dimon called Bitcoin “a fraud” once – are actively engaging with crypto.

Furthermore, in addition to a massive increase in adoption on the retail side that has surged by over 2,300% between Q3 2019 and Q2, 2021 based on Chainalysis’ report, institutional crypto demand is characterized by an intention, a more positive approach towards regulating digital assets and active developments in the field of CBDCs.

Effective regulation around the crypto industry and clear regulatory policies can promote increased business activities, all the while minimizing illicit activity and offering the necessary safeguards to end-users and investors. This can provide an excellent boost to a nascent technology’s adoption rate.

For that reason, we do not expect crypto adoption to stop anytime soon. Instead, it will continue rising in the upcoming years and more countries will adopt it.Learn more about:

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