Constituents around the world turn to crypto-currencies as a safe-haven from unstable and corrupt governments.
November 20, 2017
By: Bobby Casey, Managing Director GWP
There will always be the skeptics, but crypto-currency has no doubt had an indelible impact: especially to constituents of smaller countries whose governments are unstable and corrupt.
After the major expropriation that happened in Cyprus, small businesses turned to Bitcoin to remove themselves from the Euro and protect their assets outside the thieving central banks. Who could blame them? They lost everything practically overnight!
In fact, after the whole Cypriot debacle, Bitcoin saw a surge in value and articles started rolling out asking if that was the new safe-haven currency. It was arguably safer back in 2013 than it is now given that the governments have since been working on ways to “crack down” on crypto-currencies in general.
In Latin America, there was a surge in BitPay transaction in mid-2015. Are we surprised that a region wrought with corruption and socialism would turn to something more promising than their own currency? Even before Bitcoin took off, Argentina had what was called the “blue dollar” or the unofficial exchange rate between USD and Argentinian Pesos.
With performance like this, can you really blame them:
“[B]itcoin holders in 2015 enjoyed earnings during 2015 that performed more than 400 percent better than the Venezuelan Bolivar, more than 92 percent over the Brazilian Real, more than 65 percent over the Mexican Peso and more than 41 percent over the Argentine Peso.”
Argentina has lead the charge in crypto-currency, and President Mauricio Macri has been a refreshing champion of it. Macri has been economically refreshing for that country in general, and his radical deviation from the Kirchner doctrine has a lot to do with it.
Who’s to say that before long, Brazil and Venezuela won’t be getting in on this? Venezuela just defaulted on its debts about a week ago. The IMF is predicting that the inflation rate will hit 650% in 2017 and 2,300% in 2018. Meanwhile, Bitcoin is taking off in a hurry toward $8,000 USD.
In addition to a “safe-haven”, Bloomberg is calling Bitcoin the new “Crisis Currency”, and here’s a perfect example as to why:
“Zimbabwe, where the price of bitcoin spiked to double the international rate after this week’s military takeover, shows Jamie Dimon, Axel Weber and other cryptocurrency skeptics where the real-world use of bitcoin, and possibly its future, lies. It’s becoming the preferred way for residents of failing economies to transfer money without dealing with banks, protecting their savings from political turmoil, and avoiding the local currency when its value declines due to inflation.”
Even more stable countries in Africa still have a need for cryptocurrencies. The US and Europe are home to many immigrants from the continent of Africa, and they send money back. To Kenya alone over $1 Billion was transferred internationally. A little over 10% on average is what people are paying to make these transfers.
Cryptocurrencies could be the end of that. $10 Million NOT being spent on transfer fees? In AFRICA of all places! Yes please!
When India banned its largest monetary denomination, the internet search for “Bitcoin” spiked. It would seem there are several countries whose monetary policies have its people losing faith in their home currency.
Even Iran and Russia both seem to be toying with the idea of cryptocurrencies. Perhaps as another means of getting around the United States? Those are both in the very early stages, but it would be interesting to see what develops out of that.
Meanwhile, the United States is still on its quest of chasing shadows. I mentioned how it wants the DHS to develop a means of tracking and tracing cryptocurrency a while back. But it is also seeking the cryptocurrency equivalent of FATCA! That’s right: intergovernmental cooperation (as it is so endearingly regarded).
So these burgeoning and even struggling countries are finally getting their stride, and the US is going to swoop in with some international regulatory nonsense, and do what it does best: bog it down with regulations. Government hates competition. And what greater threat to the fractional reserve banking, than a decentralized currency that is immune to political whims of quantitative easing and expropriation? The extra level of privacy cryptocurrencies offer only further aggravates the status quo.
Of course this is all done in the name of preventing terrorism and “illicit finance crimes”.
The way governments have been treating private account holders to date, I’d say a mattress is a safer store of wealth! It won’t appreciate there, but it can’t be seized by the government as easily either.
I wrote about the Paradise Papers last week, and the quote that still sticks is:
“Over the past 40 years, offshore tax regimes have grown exponentially; back in the 1970s, they were a way for individuals to hide their money from corrupt and predatory governments in unstable countries, or for banks to move cash around to avoid fluctuations in currency rates.”
I firmly believe offshore STILL serves this purpose, but what if Bitcoin, or any cryptocurrency for that matter, did the same thing? What if, crypto currencies could be a safe haven for citizens of predatory and corrupt governments or offer fluidity in moving wealth around the world?
With smoother transactions globally, this could be the great economic equalizer that brings many developing countries onto the global stage and puts them on more equal footing. Not worrying about the volatility of an exchange rate that is affected by politicians at home, or paying the costs associated with currency exchange, both businesses and consumers can enjoy the benefit of being excused from the melee at home.
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