As the world faces a host of economic hardships, people are turning to digital currencies as they bear the brunt
Major events are precipitating and having enormous effects on global economies.
These events, such as the supply chain crisis, the conflict in Ukraine and the ongoing pandemic, have forced entire economies, businesses and populations to rethink their economic strategy.
In some cases, people have quickly turned to cryptocurrencies in a desperate attempt to get rich quick.
The use of cryptocurrencies increased exponentially during the Covid-19 pandemic, including in many developing countries.
But a recent analysis by the United Nations Conference on Trade and Development (UNCTAD) found that if cryptocurrencies became widely used, they could jeopardize the monetary sovereignty of some countries.
Ukraine tops the list for most of the population who own cryptocurrency. Russia and Venezuela in second and third place respectively.
In most cases, people own these digital currencies as a speculative asset. This means that users are betting that their investments become more valuable in the future.
But this is raising concerns among researchers, such as Dr Peter Howson (University of Northumbria) and digiconomist Alex de Vries.
In a recent article, published in Energy research and social sciencesthe couple found that “the unsustainable trajectory of some cryptocurrencies has a disproportionate impact on poor and vulnerable communities.”
For example, the world’s most popular cryptocurrency, Bitcoin, requires the same amount of energy as Thailand.
While this thinking tends to refer to the environmental footprint of cryptocurrencies, the researchers also found that “cryptocurrency makers and other players benefit from economic instability, weak regulation, and access to energy and other low-cost resources.” .
In some cases, government officials have taken the plunge and entered the cryptoverse. On the second day of the war in Ukraine, the country’s Minister of Digital Transformation allegedly asked his team to organize government wallets for cryptocurrency payments.
Similarly, Afghanistan also turned to cryptocurrencies when the Taliban took control in August 2021.
However, the Taliban has imposed a national ban on cryptocurrencies, with some Afghans arrested for defying the ruling.
Prey on the poor
The United Nations is pushing for cryptocurrency regulation, advertising restrictions, and a secure, reliable and affordable public payment system to adapt to the digital age.
It makes sense because some of the poorest and most vulnerable people in the world are likely to be disproportionately affected by proof-of-work cryptocurrency mining.
Unlike fiat currencies, such as the dollar, pound, or euro, cryptocurrencies are not issued by national governments.
They also eliminate banks as governments and put power in the hands of entire populations.
In El Salvador and the Central African Republic, national governments have adopted Bitcoin as legal tender.
Other countries, such as Nigeria, are looking into the representation of digital currencies in the form of a central bank,
Despite concerns about the mismanagement of these digital assets, it appears they are here to stay.