Pleasant accidents – how the authorities of countries accidentally stimulated the growth of the cryptocurrency market

CONTENT

  • There are several such episodes in the history of the market.

  • The authorities cannot always predict the market reaction

  • Cryptocurrency helped residents of a number of countries to bypass bans

Why bitcoin and cryptocurrencies are continuing to tick higher

International consortium of news organizations developing transparency standards.

The position of the digital asset market is influenced by many factors. One of them is the decisions of regulators from different countries. Sometimes the authorities, without knowing it, have a positive effect on the level of distribution of cryptocurrencies in the territory they control. The BeInCrypto editorial team decided to figure out exactly how this happens.

Argentines’ response to taxes

The most recent episode of unconscious government support for cryptocurrencies occurred in Argentina. Against the background of high inflation rates of the local currency – the Argentine peso – the citizens of the country, in an attempt to preserve their savings, began to buy US dollars. Local banks have failed to meet people’s demand for foreign exchange. To cool citizens’ interest in buying up assets, the authorities have come up with their own “know-how” – a tax of 35% on purchases in dollars.

In response, according to DeCrypt, locals began buying stablecoins. The spotlight was also given to the DAI coin, a “stable” coin pegged to the US dollar. The volume of purchases of bitcoins in Argentina also increased, amid inflation and attempts by local authorities to maintain control.

The volume of purchases of bitcoins for the Argentine peso. Data: LocalBitcoins

People’s solution to the problem of hyperinflation in Venezuela

Another example of the positive impact of ineffective financial policy of the authorities on the position of cryptocurrencies in the country was demonstrated by Venezuela. The local currency, as in the case of Argentina, came under inflation pressure. To combat problems in the financial market, including the sanctions pressure from the West, the authorities issued a national cryptocurrency – El Petro. Despite the efforts invested in the project, the initiative did not meet with approval from the citizens of the country.. 

As a result, the locals were faced with a choice: a hyperinflationary national currency, expensive El Petro, or traditional cryptocurrencies that have proven their effectiveness. For many, the decision was obvious. It is reflected in the statistics of the increase in the volume of purchases of bitcoins for the Venezuelan bolívar.

The volume of purchases of bitcoins for the Venezuelan bolívar. Data: LocalBitcoins

The growing popularity of cryptocurrencies in Venezuela has benefited from many crypto projects. For example, the DASH team launched a charity program to raise funds for local children whose parents were unable to feed them due to the dire financial situation in the country.. 

Also, representatives of the project offered the citizens of Venezuela a technical solution DASH Text. With it, you can send cryptocurrency via SMS without connecting to the network. The development is unique in that it can be used by the owners of even the simplest “push-button” phones. As a result, the DASH team managed to significantly increase the number of active cryptocurrency users in the country..

Pleasant accidents - how the authorities of countries accidentally stimulated the growth of the cryptocurrency market

Not in yuan, so in stablecoin

Another example is the growing interest of the Chinese in stablecoins. Recently, Chainalysis researchers came to the conclusion that the most capitalized “stable” coin – Tether – surpassed even bitcoin in popularity in East Asia.. 

Data: Chainalysis Study

Dovi Wan, managing partner of Primitive Ventures, believes that the popularity of stablecoin in China is driven by the regulatory policy of the authorities. In her opinion, Tether has become a replacement for the US dollar for the Chinese.

Data-rich report on the East Asia trading and stable coin flow

The stable coin, especially tether business in China is so fascinating. When capital control tightened, Tether becomes a USD replacement with adoption outside crypto space https://t.co/lM69vYTBvq

– Dovey 以德服人 Wan (@DoveyWan) August 20, 2020

Recall that analysts from Chainalysis recently found out that cryptocurrencies are especially popular in countries with poor economies..

Disclaimer

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Pleasant accidents - how the authorities of countries accidentally stimulated the growth of the cryptocurrency market
Pleasant accidents - how the authorities of countries accidentally stimulated the growth of the cryptocurrency market
Pleasant accidents - how the authorities of countries accidentally stimulated the growth of the cryptocurrency market
Pleasant accidents - how the authorities of countries accidentally stimulated the growth of the cryptocurrency market

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