What benefits can cryptocurrency provide to economically strong countries that aren’t necessarily in immediate times of crisis, and how can digital asset adoption offer real, long-lasting change that improves the lives of citizens worldwide?

Global Leaders: Cryptocurrency Adoption in Strong Economies

Whilst emerging markets are often driven by necessity and the need for change, there is a multitude of reasons why cryptocurrencies are so popular in markets with strong economies. Adoption in the U.K. is primarily driven by a young, tech-savvy population looking for high-yielding forms of investments.

Crypto-friendly laws and easy access to cryptocurrency exchanges and brokers are widespread. Many merchants accept digital currencies as a payment medium, and well-known companies such as Paypal and Tesla are sold on digital assets.

As with any type of market though, fear of missing out also plays a huge role and partly explains as to why many new investors have swiftly entered the crypto space during the 2021 bull market. The driving factors in economically well-off countries are thus often easy access, fear of missing out, high-yielding investments and community.

Factors that drive emerging market adoption, such as political instability, hyperinflation, government distrust and a new digital infrastructure that banks the unbanked and solves problems in regard to financial inclusion, are not at the forefront of adoption in globally leading countries.

Cryptocurrency is expanding fast in the UK. Many young people have found community through digital currencies, and whilst this isn’t the only factor driving adoption in economically strong countries, the power of community is an aspect not to be neglected. Asides from the said community and financial opportunity, cryptocurrency technology does provide real value to global players too. Some of the main benefits include low transfer fees, crypto existing independently of a nation or a border, potential for profit when trading and the blockchain offering a new and innovative information-storing technology.

Many believe that cryptocurrency is an integral part of the post-Brexit economy and the UK government should focus on crypto models and regulations that benefit citizens and businesses throughout England, Scotland, Wales and Northern Ireland alike.

Cryptocurrency Adoption in a Post-Brexit Economy

Brexit: the UK’s decision to leave the European Union has been unsuccessful so far, to say the least. The majority of economists believe that Brexit is likely to harm the economy and reduce its real per capita income long term. Among the crypto community though, some disagree: the argument that Brexit is a blessing in disguise for the cryptocurrency industry has been gaining momentum.

“There’s a real opportunity, for the first time post-Brexit in particular, for crypto to have legislation that will enable all of its key ambitions,” Blair Halliday, the UK head of cryptocurrency exchange Gemini, told Bloomberg. “They’re at a point where they’re not stymied or held back by having to consider these transitional agreements and arrangements. The foundation is there.” (bloomberg.com).

As of now, the reality looks different though. Simon Taylor, the co-founder of financial consultancy 11:FS, states: “I’ve generally been disappointed by the U.K. posture towards fintech and crypto, which strikes a more negative tone. Crypto companies in particular have told me the FCA is overwhelmed with registration requests, but also they’re unable to continue business without the new registration in the U.K.” (coindesk.com).

Many believe the UK has fallen behind in terms of crypto innovation. APPG Chair Lisa Cameron agrees: “We need to ensure that regulation keeps pace with the rapid advancements in technology. We want to see a clear regulatory framework for crypto and digital assets in the U.K. Countries around the world are currently reviewing their approaches to crypto regulation and we want the U.K. to remain competitive as a place for crypto businesses and not lose out to other more favourable regimes overseas”(coindesk.com).

Whilst it is doubtful that Brexit is beneficial on many levels, the autonomy and freedom to make decisions separate from the European Union can be a potential benefit for cryptocurrency legislation and regulation and a way to save the declining economy. Crypto businesses could bring money back into the UK, but speed needs to be kept up in order to really compete with emerging markets in terms of adoption.

Cryptocurrency in the UK Today

According to Chainalysis Geography of Cryptocurrency Report 2022 (see here), the United Kingdom ranked 17th in the Global Crypto Adoption Index and 1st in cryptocurrency value received among Central, Northern and Western Europe. A lot of this activity was DeFi-related.

Nearly 20% of the web traffic to both NFT and lending contract-related websites came from the UK, in particular this year. The UK’s crypto market was also the only top-five Western European country that grew from July 2021 to June 2022 in terms of the number of on-chain transactions its citizens engaged in each quarter.

This suggests that crypto adoption rates were more resilient in the United Kingdom than anywhere else in CNWE. This could be due to the country trying to provide certainty in terms of crypto regulation and taxation and thus giving investors a framework rather than them investing with uncertainty. One thing that needs further improvement though is consumer protections, which as of now, are insufficient.

Dion Seymour, a Crypto and Digital Assets Technical Director at Andersen LLP and former Policy Advisor at HMRC, states: “Consumer protection absolutely needs to be considered if we want DeFi to become mainstream. We will continue to see a lot of conversation among policymakers, the World Bank, World Economic Forum, OECD, HMT, FCA, and obviously HMRC this year” (Chainalysis: Geography Of Cryptocurrency Report).

On a global scale, the UK still falls behind many emerging markets, such as Vietnam or India, in terms of cryptocurrency adoption. The amount of other traditional investment options being widely available, along with lingering mistrust in cryptocurrency and the lack of an immediate need for the technology, leads to a less rapid yet still steadily growing cryptocurrency space. Whilst cryptocurrency exchanges are legal in the United Kingdom, cryptocurrency is not recognised as a legal tender, and further regulation and legislation is needed to foster mainstream adoption.

Nevertheless, it is exciting to see a global player position itself in the top 20 countries worldwide for cryptocurrency adoption, and we are excited to see how education and access will foster adoption in the United Kingdom and bring benefits to citizens and businesses alike.

(By Tina)