The use of blockchain technologies and cryptocurrencies is a complex process proceeding with varying degrees of adoption in different countries. In some, users can safely buy real estate for Bitcoin (BTC-USD) and find ATMs in the streets capable of exchanging their cryptocurrencies for fiat. In other countries, one will never even encounter a Bitcoin logo on the road (or any other cryptocurrency for that matter), as the use of digital assets is criminalized. This is where the KuCoin (KCS-USD) cryptocurrency exchange comes in.
Curiously enough, the latter countries, where cryptocurrencies are banned or restricted, are considered advanced economies. In stark contrast, digital money is more commonly used in developing countries. Statistics on this matter are being released from time to time as reports by cryptocurrency-related organizations. The latest reports of the KuCoin exchange showed phenomenal figures regarding the growth of cryptocurrency activity in African and South American countries. I discussed the given phenomenon with the CEO of the exchange, Johnny Lyu.
InvestorPlace: The latest KuCoin’s “Into the Cryptoverse” reports revealed record-high growth rates in emerging markets such as Brazil, Africa, and Turkey. Is there any general pattern resulting in the unprecedented involvement of the population in cryptocurrencies in these regions?
Johnny Lyu: Over the past year, less progressive countries have demonstrated unprecedented levels of activity regarding cryptocurrency trading. The low availability of banking services, high levels of poverty and unemployment, high inflation, weak national currencies, and corruption are negative factors that increase the public’s interest in cryptocurrencies. They are characteristic of developing countries and are practically nonexistent in developed ones to some extent.
We sometimes see that one significant factor can be enough for the cryptocurrency industry to flourish in a particular state. For example, in Turkey, which has no problems with the availability of banking services but does suffer from a high level of inflation, one can find exchangers in the central streets that will exchange cryptocurrencies for fiat. With inflation hovering at 70%, cryptocurrencies are becoming an alternative for savings and settlements for both individuals and businesses. A similar situation arises wherever a combination of these factors affects any particular person, for example, in states like Nigeria and other African countries, where poverty or the low availability of banking services forces people to resort to cryptocurrencies.
InvestorPlace: It would seem that countries with developed economies should be more receptive to innovation. Still, developing countries are ahead of them regarding the population’s adoption and use of cryptocurrencies. Why is it so?
KuCoin CEO Lyu: The level of development of banking services and their quality in the countries of Europe and the developed West is at such a level that the population does not have any needs that can be considered unsatisfied. They can pay for goods and services online, make domestic and international transfers through mobile applications, invest in securities, engage in trading, etc. In developing countries, getting access to such services is quite complex, even harder than starting to use cryptocurrencies, which require just an internet connection and a computer or smartphone. It turns out that the population and businesses of developing countries are more motivated to use cryptocurrencies and the decentralized economy has a higher degree of availability for them than banking services.
In addition, despite the low access to banking and digital services in developing regions, we see a substantial proportion of the young population whose IT literacy is growing every year. Many promising startups and innovations are popping up in India, Vietnam, Thailand, and Nigeria. The importance of the participation of this generation in the progress of the country in general and the industry, in particular, is invaluable.
InvestorPlace: How vital are poverty and unemployment in this process as factors?
KuCoin CEO Lyu: The blockchain and cryptocurrency market is a new industry with many job openings that are often well-paid, even in the most financially disadvantaged countries. Cryptocurrency startups from Latin America, Asia, or Africa get access to the “average check” in the Western market at a much lower cost. As a result, we see new companies, new jobs, new professions, and new tax revenues. This affects the level of poverty and unemployment. Often, states are interested in solving these socially sensitive issues to a greater extent than in regulating cryptocurrencies to protect the national currency and the banking system.
InvestorPlace: Can blockchain and cryptocurrencies replace access to banking infrastructure?
KuCoin CEO Lyu: In practice, yes. You can make transactions — buy goods, pay for services, make transfers, trade, and invest. At the same time, you do not need to visit bank branches, stand in line, etc. Many people and businesses in these regions use cryptocurrencies because of their advantages over the traditional banking system. The shortcomings of conventional financial systems in developing countries make them fertile ground for introducing cryptocurrencies. Cryptocurrencies can provide significant benefits by expanding access to financial services.
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Cryptocurrencies are seen as a means of supporting economic growth in third-world countries. They provide better traceability of funds while increasing financial inclusion. As such, people in developing countries can escape poverty and resist corruption.
InvestorPlace: Do you think many new users from underdeveloped regions see cryptocurrencies as a reliable store of value or an investment instrument?
KuCoin CEO Lyu: To answer this question, you need to understand that the worse the standard of living and the situation in a country, the more often people turn to alternative sources of saving money. The preservation of savings rather than their accumulation usually takes a dominant position.
InvestorPlace: But wouldn’t that be a contradiction since crypto assets are volatile and risky?
KuCoin CEO Lyu: Cryptocurrencies will always be more volatile relative to fiat funds. On the other hand, we see forecasts of unprecedented inflation in the global economy. In 2020, for instance, the U.S. dollar depreciated by 16% compared to the Australian dollar and Mexican peso. And yet, Bitcoin tripled in value in 2020.
Let’s talk about buying cryptocurrencies as a store of value. Stablecoins are in the lead since they are not subject to exchange rate hikes relative to other currencies and can also offset the effects of inflation in the long run. Some risks will undoubtedly remain, so users need to remember the importance of diversification and proper market research.
InvestorPlace: Judging by the numbers you shared with us, is it fair to say that the swift growth of the crypto market that we have seen over the past year is primarily due to the inclusion of users from new regions?
KuCoin CEO Lyu: Exactly. According to Chainalysis, Latin America accounts for about 30% of traffic on cryptocurrency exchanges. The share of traffic from Africa has grown to 10%, while Eastern Europe stands at 10%, which is twice as much as in Western Europe.
Central and Southern Asia, Latin America, and Africa divert more web traffic to peer-to-peer (P2P) platforms than countries with larger economies, such as Western Europe and Eastern Asia. Therefore, the role of these countries in today’s cryptocurrency boom is underestimated, and we should intensify our work with new regions, providing them with advisory, educational, technical, and financial assistance. I am sure that Africa or Southern Asia can become innovation hubs to develop trends in the cryptocurrency and blockchain industry.
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