Bitcoin and why it’s so popular in developing nations
Bitcoin is one of the most revolutionary things to happen in the modern world. Some crypto enthusiasts are calling it the best thing since the moon landing, which they’re not too far away from.
Humanity’s access to space introduced multiple benefits to the world, but it was all unilaterally accepted as a large step forward. Cryptocurrencies are still on their way to achieving the same amount of value for the world, as governments all over the globe are slowly starting to understand the technology and see the benefits that come with it.
However, we’ve seen numerous times that developed nations tend to avoid it at first and take their sweet time researching it to the last drop of information. This tends to alienate the local population from the benefits that others are tapping into. Middle Easterns countries come to mind, who had to face national bans on cryptocurrencies, while the rest of the world was profiting from the crypto craze in 2017.
But ever since the crypto craze, we’ve started to see a much more hands-on involvement from numerous financial institutions from countries like the United States, the United Kingdom, South Korea, Japan, and many others. This strikes one’s attention on a much higher level when we compare these legislations to developing nations, where crypto regulation is virtually non-existent, why? Because it’s beneficial for the economy.
Why developed nations regulate cryptocurrencies
There are several reasons why developed nations would want to keep a close eye on cryptocurrency transactions. One of those reasons is the prevention of money laundering cases, which lead to millions of dollars being funneled outside of the country illegally, ultimately hurting the economy.
Another reason is to prevent the local population from using the cryptocurrencies for illegal or heavily regulated services and goods. Purchasing illegal substances and registering on wagering websites comes to mind.
However, there is also another anomaly to these reasons, mainly from Australia. Australian gaming operators that offer crypto deposits and crypto wagering are usually the targets of local legislation, simply because the government wants to crack down on the activity in general. Having the population make a transaction through cryptos, makes the tracking efforts much more difficult.
A representative from one of the top Australian Bitcoin casinos had this to say about crypto transactions for wagering:
It’s very hard to maintain this type of business model, simply because the numbers you get don’t directly translate into revenue. It’s no secret that Bitcoin casinos in Australia are being used as liquidity sources. We’ve seen numerous times that customer deposits were as much as 1 Bitcoin on our platform, only to use 1/20th of it for playing to meet the minimum requirements and then file for withdrawal in cash.
We can’t deny these types of withdrawals because they’re happening through non-centralized means, such as PayPal or other digital wallets. If they were being processed by banks, we’d immediately classify them as suspicious activity.
Plus we always get the occasional visitor from the government wanting to check if everything is going smoothly with crypto transactions. On the surface, it does look like everything’s completely fine, but we know for sure that legislation is on its way to disrupt these payments, and in all honesty, it would be a breath of fresh air for most companies”
We can see that there are actual cases where cryptos could potentially be used for laundering money outside of the country by avoiding both the banks and the government completely. This is one of the reasons why developed nations regulate cryptos on such a detailed level.
But what about developing nations? Don’t they have any issues with money laundering cases through cryptocurrencies? Why aren’t they raising the same red flags as the developed nations? Well, they have their reasons as well.
Cryptos benefit developing economies
One of the primary reasons why developing nations don’t place too much of a strain on cryptocurrencies in their local jurisdiction is because of the taxes they’re able to generate from both local exchanges and miners.
Developing nations are usually quite a small market size, and even if they have tens of millions of people living in the country, it still doesn’t rival the capabilities of a consumer from a developed nation.
This is naturally not beneficial for a crypto company at all, therefore other means need to be found to appeal to these corporations. Most countries tend to appeal to these companies with low electricity costs, low taxes, cheap labor or just no inherent government interference.
This tends to do the trick and incentivize the crypto companies to move house to the developing nation. The nation gets a locally registered company that could potentially offer benefits to the local consumer, thus allowing them to grow their financial prowess through foreign currencies. Most developing nations have weak currencies, therefore any means of income through a strong currency like the USD is always welcome.
And last but not least, developing nations see the blockchain as a golden opportunity to be a leader in something. Most of the current traditional industries are already being dominated by developed nations, overtaking which is practically impossible. Therefore, developing nations try to focus on the new and profitable, then the old and stable.
An example of this is the tiny nation of Georgia, which is currently #2 in terms of crypto mining power, and could soon be #1 if China decides to seriously crackdown on mining operations within its territory.