Many developing countries have undoubtedly experienced their share of economic hardship. Some of these countries have unstable and unreliable fiat currencies. So they are embracing Bitcoin to see if the cryptocurrency can boost their economic growth. Among the countries that have legalized bitcoin as legal tender are El Salvador and the Central African Republic. More and more people are flocking to the About Platform to buy and sell this cryptocurrency. Even Honduras, one of the strongest and fastest growing economies in Central America, has embraced Bitcoin.
Honduras could be the latest country to surprise some experts by adopting bitcoin. This economy had some difficulties, and the introduction of Bitcoin could help solve them. In 2018, about 16.5% of Hondurans survived on no more than $1.90 a day. However, natural disasters, including two hurricanes, have affected the country, exacerbating the number of people living in poverty. In addition, the Covid-19 pandemic has affected the economy of this country. The poverty rate rose to 73% in 2021, and the extreme poverty rate reached 5%. This is the highest poverty rate in the country since 2005.
Causes of economic hardship
Most of the developing countries that have adopted bitcoin are dependent on trade and agriculture. Consequently, their economies are in distress when a pandemic or natural disaster affects these sectors. For example, the Covid-19 pandemic has affected trade in most countries due to travel restrictions.
Similarly, a country like Honduras had to deal with two major hurricanes in 2019. In 2019, its agricultural sector accounted for less than 30% of the workforce, which accounted for about 12% of the gross domestic product. The country’s trade with the United States accounts for approximately 41% of annual activity. By the end of 2020, bilateral trade revenue exceeded $9 billion.
How Bitcoin can help solve economic hardships
The use of Bitcoin can bring several benefits to developing countries. Some of these countries are hoping that Bitcoin adoption will appeal to investors and attract more tourists. El Salvador and Honduras are neighbors. Therefore, these countries hope that the adoption of Bitcoin will open up more business opportunities abroad and even in international markets.
Bitcoin has significant potential for trade and economic security. Also, some people prefer Bitcoin due to its low transaction fees. Therefore, some developing countries hope that the low cost will attract and encourage investors and locals to use cryptocurrency.
Low transaction costs are especially beneficial for the poor as they avoid additional fees charged by traditional financial service providers. However, Bitcoin adoption comes with challenges, including technological hurdles in some places. Some of these issues may include setting up cryptocurrency wallets.
But if these countries overcome technological challenges, they can create jobs and business opportunities. They can also diversify the financial base of their economy. And this diversification could bolster future security if agricultural and commercial bases become tight or falter.
Bitcoins may not be accepted in some countries. This is because the deployment and adoption of Bitcoin is taking place in multiple regions. In addition, some people are skeptical about the economic benefits of Bitcoin, especially after seeing El Salvador’s difficulties weeks after the adoption of the cryptocurrency.
However, Bitcoin helps some people, even those living in rural areas, to participate in economic activities. Indeed, they can access capital without much difficulty. They can also participate in bitcoin trading, which can bring them profit. In addition, Bitcoin provides traders with access to international markets and economies. In this way, Bitcoin can help more people trade internationally and boost economic growth.
However, developing countries need to improve their infrastructure so that people in rural areas can access the Internet, create cryptocurrency wallets, and access bitcoin through cryptocurrency exchanges. In this way, these countries can help their citizens to benefit from this cryptocurrency.