{"id":34685,"date":"2019-06-18T17:50:25","date_gmt":"2019-06-18T21:50:25","guid":{"rendered":"http:\/\/www.andysowards.com\/blog\/?p=34685"},"modified":"2023-04-13T15:31:58","modified_gmt":"2023-04-13T19:31:58","slug":"will-crypto-adopted-first-emerging-markets-vs-developed-nations","status":"publish","type":"post","link":"https:\/\/www.andysowards.com\/blog\/2019\/will-crypto-adopted-first-emerging-markets-vs-developed-nations\/","title":{"rendered":"Where Will Crypto Be Adopted First? Emerging Markets Vs Developed Nations"},"content":{"rendered":"

Many people like to talk about crypto adoption in broad and sweeping terms. However, the big debate surrounds where cryptocurrency might be adopted first at scale. Though it is impossible to predict the future, cryptocurrency projects and enthusiasts alike tend to discuss adoption in terms of developed and developing markets. In this article, we\u2019ll explore the core arguments for each and highlight some of the initiatives being pursued by projects to hasten mass adoption.<\/p>\n

The Argument For Developed Markets<\/h2>\n

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Although many developed markets are commonly characterized by a stable fiat currency and relatively low levels of inflation, some are already nearly cashless societies. In nations like Sweden, just two percent of the total value of all transactions<\/a> made by Swedish citizens are made with cash. On the other side of the fence, 98% of consumer payments in India<\/a> use cash. The interesting thing about developed nations like Sweden is that they are close to achieving a position where physical fiat currency is no longer an effective method to execute everyday transactions. Indeed, many stores in Sweden simply do not accept cash at all now.<\/p>\n

The rise of a nearly cashless society in Sweden has been enabled by the meteoric rise of apps like Swish. These apps give users the ability to link bank accounts and to send or receive payments with a few taps on their smartphone. The Swish app now boasts over 6 million users which is a staggering 60% of Swedens population. What\u2019s important here is to understand that Swedes are very accustomed to using digital cash and transferring value with apps. At its core, it\u2019s not that big a jump from using an app like Swish and using cryptocurrency as a means of exchange.<\/p>\n

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Within Swedish society, it is very possible to live in major cities and not use cash whatsoever. It is true that under Swedish law that merchants are obligated to accept cash by means of payment, however, many exploit loopholes in the legislation to gain an exemption. This has led to some stores putting up signs saying that cash is not accepted. In short, Swedes are a population that is very used to money being digital and regularly transact value using apps on their mobiles. For many cryptocurrency supporters, the next step in the evolution of money is cryptocurrency and developed nations like Sweden have a population that should, in theory, be able to transition between the monetary systems with little friction.<\/p>\n

Sweden\u2019s national bank has also gone as far as suggesting that it was considering the creation if it\u2019s own national digital currency called the E-Krona. Even though Sweden\u2019s national bank, Riksbank, is pushing for a state-backed cryptocurrency, most do not believe it will happen anytime soon. As Sweden\u2019s use of cash diminishes, calls for a national cryptocurrency are only likely to increase. Regardless of whether Sweden goes full crypto anytime soon, the progressive thinking of the Swedes places this small nation at the forefront of a potential monetary revolution. Many point to Sweden’s progressive thinking, nearly cashless society and the population’s high levels of adoption for mobile payments to argue that Sweden is probably the most likely nation on the planet to first adopt cryptocurrency at scale.<\/p>\n

Could Crypto Replace Fiat In Sweden Anytime Soon?<\/h2>\n

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Many would say that the centralized nature of the proposed E-Krona means that it is not a true cryptocurrency at all. Regardless, many commentators do not foresee the E-Krona being deployed for at least two years and suggest it could take the better part of a decade to roll out. If these claims are to be believed, then there is scope for Swedes to adopt an alternative cryptocurrency like Bitcoin or Ethereum before the E-Krona makes it\u2019s highly anticipated appearance.<\/p>\n

The key question is whether a cryptocurrency like Bitcoin can really replace the Krona overnight? The answer is probably not and it\u2019s important to make a distinction between mass adoption and \u2018total adoption\u2019. If Sweden were to mass adopt cryptocurrency then the most likely outcome would be that crypto would be a relatively widely used alternative to the Krona, rather than replacing it overnight. This would mean that cryptocurrencies like Bitcoin and the Krona would have a period where they co-existed side by side.<\/p>\n

Problems That Need To Be Overcome<\/h2>\n

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When it comes to mass adoption, the current issue posed by the co-existence of fiat and cryptocurrencies is that the two systems are currently connected very poorly and there is significant friction when transferring value from the traditional banking and cryptocurrency ecosystems. Many people view the building blocks of cryptocurrency adoption as being widening merchant acceptance of crypto. Fundamentally, this does appear to make sense for if crypto is to transition from a speculative asset class to a medium of exchange it needs to be accepted widely to enable its exchange for goods and services. However, the issue is that the vast majority of merchants have operating costs and have to pay suppliers in fiat. This means that most businesses cannot simply accept crypto and hold it. Instead, they are forced to sell any crypto they receive in payments and convert it to fiat to continue operating their businesses.<\/p>\n

This need for merchants to convert cryptocurrency received for fiat is currently being served by crypto payment processors like Bitpay. However, the issue here is that fees as high as 5% can be charged by crypto payment processor companies. The numbers simply do not match up when you consider the operating margins of most online businesses. These margins can be as low as 0.5% to 3%<\/a> and this highlights the very real need for a low-cost merchant solution to enable the wider adoption of cryptocurrencies in the real economy.<\/p>\n

It\u2019s not surprising that merchants care about the bottom line. Research from the Bank of Canda supports the idea that merchants prefer to accept the payment method with the lowest fees. The bank looked at a typical transaction of $36.50 and determined the costs by payment method.<\/p>\n