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If we look up in Google Trends, we will see the significant growth of interest in cryptocurrency and Bitcoin in the recent month. This is explainable — the total crypto market cap doubled in just two months to the whopping $1 trillion, lucky investors made terrific profits, and the general audience is extremely curious about the reasons for this blockchain-based success. 

But behind and before this spark of interest, there have been months and years of steady crypto market development in a number of regions of the world. Among the others are the United States and Canada, Nigeria, Cyprus, Singapore, South Africa, the United Kingdom, and several European countries. South America’s Brazil, Bolivia, and Ecuador are also in the trend. Traditionally crypto-friendly Japan is a little off this list. Interestingly, the number of search queries about Bitcoin specifically sparked 2-3 times more than that to cryptocurrency in general. 

Does crypto serve each of these countries in the same way? Bitcoin and many other coins have been designed as a blockchain-based alternative to the traditional banking system, and in developing countries with poor economies, they do serve this purpose. This is less relevant though for the countries with stable local currencies. In the developed states, Bitcoin is mostly a tool to make from trading and investment. 

Now, let’s take a closer look at several countries with high interest in crypto right now. How is crypto regulated in developing and developed countries, and how widely it is adopted? 

United States

In some way, the USA is the stronghold of cryptocurrency. Although its crypto regulation frameworks are still ambiguous and some of the higher-level authorities are skeptical about Bitcoin, cryptocurrency has always been legal in the USA. Silicon Valley and regions have become home to such outstanding cryptocurrency exchanges as Coinbase, Kraken, Gemini, and Poloniex. Cash App is also based in the USA.

Unlike some countries of the world, crypto in the USA is not legal tender. The SEC (Securities and Exchange Commission) sees cryptos as digital currency, the CFTC (Commodity Futures Trading Commission) classifies them as commodities, and the IRS (Internal Revenue Service – America’s tax authorities) defines Bitcoin as property. The latter is cool in terms of taxation — you have to pay tax if you invest and then sell Bitcoin or Ethereum for cash, but if you just earn it somehow or send without USD in between, regulators don’t view it as a tax event. 

Nearly 25% of worldwide trading of Bitcoin is concentrated in the USA: Americans prefer speculating crypto instead of actually using it. You can pay with virtual currencies in Starbucks or buy/sell it in one of the 12,000 ATMs, but not too many people do this, preferring credit cards for these purposes. The reason is simple: Americans have a stable currency and a well-developed banking system. They have access to good financial services, their local currency is not as prone to inflation as those of Argentina or Venezuela. 

Venezuela 

Bitcoin or Litecoin volatility is quite high compared to the world’s most stable currencies. However, it’s not even close to Venezuelan Bolivar’s inflation rate, which was over 2,300% in 2020. 

What happens if a currency plunges so fast? Let’s give it an example. Say, you have 1,000 of fiat currency today and can go buy some food and clothes. Maybe not tomorrow, but in a month or a year, you won’t even be able to buy a loaf of bread with the same sum. 

In the cases when the economy is so weak, some local authorities start using different fiat currencies like the US Dollar instead of their own currency issuance. That’s what happened in Zimbabwe, but that’s not the case for Venezuela due to poor relations between the countries. As a result, President Maduro announced in September 2020 that the country is to start using cryptoassets to neutralize crippling U.S. economic sanctions and fight the deepening economic crisis. 

However, the local population has started using Bitcoin transactions, crypto exchanges, and blockchain technology long before the country’s leader announced it. When the inflation rate goes up as high as 10,000,000% in 2019, you just have to find an alternative to the local central bank. For many Venezuelans, Bitcoin is that lifeline now. 

Nigeria 

Nigeria is not the only country in Africa where BTC is extremely popular. South Africa, Ghana, and Kenya are also very keen on crypto assets and blockchain. Senegalese-American singer and songwriter Akon has even started to erect his own Akon Crypto City in Senegal. However, the interest of Nigerians in the crypto ecosystem and alternative financial institutions beats all records. 

According to a leading peer-to-peer bitcoin marketplace Paxful, Nigeria now has the world’s second-largest Bitcoin cryptocurrency trading volume. 60,215 Bitcoins have run through trading platforms in this country since 2016, even before the ICO boom of 2017 — and the trading volume still continues to grow by 20% each year. A significant number of people are involved in the distributed ledger industry. 

Why are the crypto financial market and fintech so popular in Nigeria? There are several reasons for this: 

  • The local currency is inflationary. Nigerian Naira showed a 12.9% inflation rate. Such fast depreciation makes people use Bitcoin that grows each year. 
  • Many Nigerians live abroad and send money home, but it’s hard to make remittances to Nigeria. PayPal doesn’t work here, local banks restrict international transactions and charge high fees. Cryptocurrencies solve this problem.
  • Nigerians are active not only in crypto remittances but in local peer-to-peer transactions as well. Here, the network effect takes place: over 11% of internet users in Nigeria aged from 16 to 64 own cryptocurrency, which means sometimes it’s easier to send crypto to people directly without withdrawing to cash. 
  • Nigeria has a status of a regional tech hub. Local circumstances allow creating crypto-related jobs, and many young and tech-savvy individuals inhabit the country. They tend to widely use crypto.
  • When the protests flared up in October 2020, local authorities froze the activists’ bank accounts. The protesters have quickly moved on using Bitcoin. 

What’s the regulatory framework for crypto in Nigeria? Just as in the USA, Nigeria’s tax authority is called SEC, Securities and Exchange Commission. In September 2020, they announced the new cryptocurrency regulation. Every digital asset in Nigeria will be now treated as securities and must be registered by any individual or corporation involved in a blockchain-related activity. Local authorities say these regulations will increase safety for crypto users in Nigeria. These measures are considered a good signal to investors who need clarity on the legal framework.

Australia

Crypto in Australia is also on the rise. According to a survey from late 2020, every fifth young adult in Australia owns the digital currency. Another study showed 13% of Australians own Bitcoin and 6% have Ethereum. The Reserve Bank is investigating the functionality of cryptocurrency, and the national Post service even started to sell Bitcoin at the Post offices! Over 3,500 locations are available countrywide. As Australians say, for many, buying Bitcoin for the first time this way feels safer than doing so online. 

What’s the reason for such popularity of digital assets in Australia? Like in other developed countries, people invest in Bitcoin and enjoy its increasing value, trade on the coin’s price fluctuations, and hedge against inflation, although the latter is extremely low in the country. Many Australians stated they didn’t buy crypto in 2020 due to the economic uncertainty. However, in general, locals are optimistic about the future of crypto, as surveys show.

Bitcoin in the world — a store of value and the local currency substitute

As we can see, the main use cases of cryptocurrency depend on the country and break down into two main categories. For developed countries with stable economies, Bitcoin is mostly a trading and investment tool that helps people gain profits. For developing countries with poor economies, Bitcoin serves as a substitute to the local currency that depreciates fast and thus doesn’t serve as a normal means of value exchange. Also, here, Bitcoin serves as a tool for remittances as traditional financial infrastructure doesn’t allow doing so. 

As you may have noticed, countries use different approaches to crypto in terms of taxation. This January, we issued a special guide to help you navigate in the world of crypto taxes. There, we took a close look at how crypto is treated in different countries and what this means to you.  

The good thing that for borrowing crypto, there are no clear legal frameworks yet. Thus, you can take a loan in crypto right now without having to pay any tax. Look up CoinRabbit and see the offers!

Post Author: Diana Kelley

Hey! I'm Diana, CoinRabbit's blog manager. I want our blog to be the most useful and interesting!
Also, I love rabbits.