Why are so many Emerging Nations drawn towards the DeFI space?
DeFI Space is a relatively new world only 15 years in existence but it has generated a lot of interest from users and institutions to be invested in the space. It is fair to assume that with the heavy interest being poured into the space, many countries will follow to regulate and take the opportunity to be a global hub for the DeFI Space. While superpower nations such as the USA and the United Kingdom are usually the ideal nominees for this global hub position, it is quite strange that many emerging nations are showing their dominance in different aspects of the DeFI Space. So why are these emerging nations drawn into the DeFI Space? What are the benefits in return for them to be invested in the space?
Digital Currency and Emerging Nations
The introduction of Bitcoin in 2008 was not only perfectly timed but also revolutionary, to say the least as we look back in 2023. Bitcoin came as a solution to the greedy economy that thought to overstep its boundary in taking risks and bringing the whole economy into a meltdown. Bitcoin was also seen as an option for people who would like to escape the traditional world and the uncertain swings that might occur due to regulation or financial crashes.
We all are familiar with the Great Recession that happened in 2008 when the housing market, which was assumed to be stable, eventually collapsed due to the risky financial instruments built around it. We are also familiar that around this time, Bitcoin was first proposed as a form of Digital Payment System by Satoshi Nakamoto. But what we least likely know was 2008 put a spotlight on how interdependent the rest of the world was to the decision made by the USA.
We always knew that the US Dollar was the reserve currency of the world but no one really expected that the collapse of 2008 was going to cause trouble for the rest of the world. This is what leads to many people and countries starting to start reducing their dependency on the USA and the US Dollar as the term De — Dollarization becomes more often heard. One such example is the BRICS Alliance which comprises influential nations such as China, India, Russia, Brazil, and South Africa that seek to develop an alternative reserve currency to the US Dollar.
Along with this we also see the rise in popularity of the DeFI Space as it becomes more mainstream and adoption starts to grow. The rise of Bitcoin towards its peak of $69,000 then drew more institutions and countries towards this new decentralized space. With this rise in popularity, it is fair to assume that developed nations such as the USA or China will be the first ones to take advantage of this new opportunity but it’s not exactly true.
Although large DeFI Firms such as Coinbase and Tether originate from the USA, they are still lagging in terms of regulations with emerging nations such as India or South Korea. China, which was once the largest in terms of Bitcoin mining, then decided to outright ban Digital Asset in the country as of 2021. The absence of these developed nations then triggers emerging and developing nations to fill in the gap within the DeFI Space.
We see a large part of the digital asset mining industry enter Kazakhstan in 2021 becoming the largest contributor beating the USA and Russia. We also see countries like El Salvador which took the gamble of adopting Bitcoin as its official currency in 2021 and becoming the first country to present such regulation. These examples then trigger more countries who seek to regulate the DeFI Space and maximize the opportunity it can bring instead of outlawing it.
The DeFI Space continues to grow in many emerging markets as they have more reason to opt for cryptocurrency. New research carried out by consumer analyst firm Toluna points out that more than 46% of residents in the Asia Pacific emerging market have invested in cryptocurrency compared to only 26% in developed nations. The study was carried out to more than 9000 respondents between the age of 18 to 64 across 17 countries and more than 50% were from emerging markets such as Singapore, Australia, Thailand, India, and Indonesia.
The studies also point out that residents in emerging markets also had more trust in digital currencies at 32%, compared to 14% of developed nations, and also less likely to see crypto as a risky investment at 25% compared to its peers from developed nations at 42% of residents which view crypto as risky. The study also concluded Vietnam, Thailand, Philippines, and India being the amongst the most receptive countries towards cryptocurrency in the world currently.
So why is this shift happening more frequently in Emerging Markets? Some of the reasons were that cryptocurrency is viewed as an alternative to mitigate the risk that is happening to the economy. As mentioned before, developed nations such as the USA have more influence on the global market than the countries in the emerging markets and with most emerging markets facing a setback ever since the Pandemic, the residents within these countries seek cryptocurrency rather than their fiat currency to safeguard their wealth.
Another reason also points out that emerging markets are more perceptive towards cryptocurrency as they seek to attract investment within the country to help them develop. The hype and the growth that the DeFI Space continues to bring should not be estimated and emerging markets are gearing up to regulate the space to attract more growth within the country. With countries like UAE, Vietnam, and India paving the way forward, will we see more emerging markets join in?
The Way Forward for Emerging Markets
Despite the setback around the DeFI Space in 2022, the users and enthusiasm continue to propel the community forward. A lot of the narrative over the years has changed as Cryptocurrency has proved its ability in 2023 to be a safeguard for many residents. We can see this in countries such as Pakistan which is currently 6th in terms of global crypto adoption according to a 2022 report from Chainalysis. People in Pakistan are reportedly converting their income into stablecoin to prevent currency erosion as the rupee continues to depreciate.
The same reason also occurs in Turkey which is the 18th largest country in the world and 12th in Chainalysis’ 2022 crypto adoption ranking as its fiat currency woes and therefore the pressing need to diversify will likely push it up the list. There are also many other examples of citizens around the world turning to crypto to hedge against depreciation in their local currency with Ukraine, Argentina, and Lebanon are a few that come to mind.
Of course, there are also countries as mentioned before like Thailand and UAE which have established much more clear Crypto Regulation in the hope of attracting more institutions and tourism within the country. It’s also a point to note that most of the population lives in emerging markets such as India, Indonesia, and Brazil and these countries will look to seize the opportunity to become the leading nations within the DeFI Space.
Whatever the reason may be, the DeFI Space will continue to serve its purpose in our lives and its adoption especially amongst the younger generation will continue to bring it forward. The absence of developed nations in this growth will continue to be filled by more emerging markets as these countries will also look to grow their presence. What is certain is we can expect exciting growth for the DeFI Space, especially amongst these emerging markets in the years to come.
We at Nagaya Technologies certainly believe that there is a huge potential to be found in the DeFI space. We hope that the development going on in emerging nations around the world should be able to help the recovery of the DeFI space in 2023 and beyond. That is also why we created the world’s first hybrid digital assets called Nagaya which will soon be a part of the revolution needed towards sustainable Digital Assets for the Global DeFI space. Interested to know more about Nagaya, you can visit our website at www.nagaya.co
Or you can talk to us at t.me/nagayaofficial
