Nevertheless, Bitcoin is a vital financial instrument that comes in handy for people living in countries affected by inflation. One of the bad things about inflation is that people can’t use fiat currency as a store of value due to the sharp decline in value. This is where Bitcoin comes in.
Bitcoin Helping Shattered Economies
Venezuela is one of the shattered economies suffering from notorious hyperinflation. In 2020 alone, the annual inflation rate in the country rose to 6500%, which caused many bank savings to go up in smoke as the Venezuelan Bolivar lost value.
While some people scrambled to change their savings into the US dollar, the more smart ones went with Bitcoin. The number of Bitcoin traders in the country has increased dramatically, although these traders are often the upper middle class and the elite traders who can afford internet connectivity.
Let’s look at another country, Argentina, which is also suffering from an economic downturn. The Argentinian economy suffers from high inflation, a deflating currency, and a shortage of US dollars. The number of user accounts dealing with Bitcoin and other cryptocurrencies in Argentina has increased by over ten times since 2020.
For those who want to save some money, Bitcoin provides a solid refuge to turn to. Argentina has around 45 million people, and out of these, 2 million are already invested in crypto.
Iran is also another country suffering from an economic backlash after heavy US sanctions. Food price inflation in Iran reached 43% in May. In 2020 alone, the country’s currency lost around 57% of its value. The sanctions have made it even harder for the government and companies to engage in foreign trade.
To solve this problem, the Iranian government and individuals have been using Bitcoin to buy imports. At least for the time being, Iran is hopeful that Bitcoin will help its economy survive.
The embracement of crypto by economically shattered countries has posed a threat to their domestic monetary systems. Argentina recently announced that exchanges would have to share details about crypto transactions with regulators.
Iran has been even more strict in protecting its financial market from capital flight caused by crypto purchases. The government stated that it would only allow Bitcoin to make purchases when that Bitcoin has been mined in the country.