Crypto: Can Bitcoin Help Developing Countries Out of Poverty?

The World Economic Forum Annual Meeting is underway and leaders across the world are sharing their insights on the state of the global economy. Deputy Managing Director of the IMF Gita Gopinath stated in a panel discussion earlier today that the world has very divergent recoveries following the aftermath of the pandemic.

“Advanced economies will get back to where they would have been in the absence of the pandemic by 2024. Basically no output losses there,” says the economist. “But emerging economies and developing economies will be at 5% below where they would have been in the absence of the pandemic.”

With emerging economies facing the brunt of the pandemic, the question arises – can cryptocurrency help these nations? When El Salvador made the move to declare Bitcoin as a legal tender, the world was stunned. The IMF even went so far as to ask the nation to scale back on its decision. However, this left experts across the world wondering why developing countries were more open to adopting cryptocurrency than their wealthier counterparts.

Recently, Jonathan Wheatley of the Financial Times elaborated on this topic on a podcast run by the news outlet. “What we’ve seen is that adoption becomes quite high in places where people don’t necessarily trust the national currency.”

The correspondent added that developing countries were prone to runaway inflation or unpredictable inflation. Bitcoin and other cryptocurrencies offered some respite from this turmoil. Wheatley also stated that in countries where national currency moved sharply in value, the kind of risk cryptocurrency posed was acceptable.

In short, it wouldn’t be absurd to assume that cryptocurrency could change the economic state of developing nations for the better. However, without tangible evidence, such claims can only remain speculative.