Tracking Sovereign Adoption of Bitcoin

As bitcoin storm live becomes commoditized, tracking sovereign adoption is essential to potential investors or traders in this digital asset class.

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In addition, a recent report by the International Monetary Fund (IMF) shows a significant year-over-year jump in bitcoin penetration across the planet.

Although it’s a small share of the world’s M1 money supply, bitcoin adoption is rising in a global boom.

In fact, as of 2022, only 2% of all money worldwide is held in bitcoins.

But because this digital currency is still so new and has such potential for future price appreciation, that number could rise quickly over the next several years.

The IMF tracks bitcoin penetration through two metrics, BTC in circulation and the Bitcoin M1 money supply.

(M1 is a phrase used by the central banking community to refer to the most liquid forms of money, such as currency in circulation and demand deposits.)

Bitcoin was invented 11 years ago, so its adoption remains relatively minuscule.

Nevertheless, not only did bitcoin’s $400 billion market capitalization soar about 68% to 1 trillion dollars this past year but its user base from millions to billions in just a few years.

What does it mean to tracking sovereign adoption of bitcoin indeed?

Right now, only “weak dollarization” is occurring.

However, if you went to Argentina, you’d find merchants and shoppers who’ve already taken a much more decisive step towards de-dollarization by using bitcoins rather than the peso.

It is because they’ve lost faith in the Argentine government’s management of the national currency.

The IMF explains:

The share of transactions made with bitcoin in the total value of international payments has increased significantly this year compared with the previous two years.

Bitcoin’s share of cross-border payments has risen from less than 0.05% at the beginning of 2013 to 0. 6% in April 2015, compared with 0.1% at the end of 2013; this is from where it all started; now, bitcoin accounts for more than 10% of cross boarders transactions.

There are many possible explanations for the recent developments in bitcoin’s use for international payments and other cross-border transactions.

It most likely includes both technological developments and changes in market sentiment.

During the past few months, several major technology providers announced plans to enable businesses to use blockchain applications in various financial markets.

And given that market sentiment has improved considerably in the past year, making bitcoin a more attractive asset class.

So it was only a matter of time before sovereign states focused on this emerging cryptocurrency and its possible effects on the global economy.

Degrees of adoption

The U.S. Federal Reserve is still studying the pros and cons of blockchain technology.

Still, it has already committed to a 12-month research project involving the U.S. Treasury Department and 11 other federal agencies on various aspects of distributed ledger technology and its potential use in international finance.

For example, this technology, which operates globally, could prove very useful for solid dollarization efforts amongst commodity-dependent nations like Argentina and Venezuela and emerging economies like Brazil, China, India and Russia.

Use of bitcoin in future as a currency

It’s not just bitcoin use in international trade that’s on the rise.

The IMF points out that bitcoin’s use of the currency as a means of exchange is also increasing.

It shouldn’t surprise anyone, considering transactions with bitcoin can be made by users anonymously and without paying any relevant taxes.

Moreover, so much new money is being pumped into this digital currency each day that this trend will likely continue for years to come, defeating the purpose of solid dollarization.

How to track your country’s adoption

Almost every nation in the world has taken steps towards strong dollarization through paying taxes and other measures designed to weaken the power over its national currency.

But not all countries have adopted this policy.

An IMF report released in April points out that, of all the countries studied, only 15 are “fully dollarized”, and now the majority of these countries are moving towards bitcoin adoption by allowing merchants and customer payments in bitcoin.

Moreover, these countries are correspondingly working upon CBDC.

The IMF explains the benefits of diminishing strong dollarization and adoption of bitcoin

Experts have proposed the benefits of using central bank digital currency (CBDC) in small and emerging economies.

They include increased financial inclusion, reduction in costs of retail payments, and enhanced efficiency in the wholesale payments system.

In addition, CBDC can potentially help central banks gain more control over the money supply and inflation and facilitate the implementation of monetary policy by allowing for interest rate changes like conventional electronic reserve accounts.

Three countries are fascinating in compiling bitcoin penetration statistics and tracking adoption trends: Argentina, Venezuela and India. Argentina is leading the way regarding total bitcoin penetration across its population.

Argentina’s government has taken strong dollarization measures to limit the impact of inflation on its economy.

To keep citizens from losing faith in the national currency (Argentine peso), Argentina has banned all transactions between Argentine pesos and dollars.

It may make it easy for businesses and individuals to use bitcoin as a haven asset since they can’t hold or conduct cross-border payments with dollars.

MNCs showing bitcoin adoption

MNCs are also starting to trickle down their use of blockchain technology and bitcoin.

For example, MNC, and Coca-Cola, plan to use this new technology to advertise remittances in Vietnam.

It’s also been reported that Bank of America is testing this new technology.

For overseas transactions, merchants and banks may receive a better rate of return by accepting bitcoin, compared with the cost they pay on wire transfers or other foreign payment systems.

Starbucks, Dell, and 15 other MNCs have been integrating bitcoin into their payment ecosystem for a long time as bitcoin is an electronic currency that can be used by people like any other electronic currency in many places and online stores.

The percentage of bitcoin transactions has increased in recent years due to an increase in the use and demand of bitcoin.

Closure

Adopting bitcoin as a currency will positively affect the world economy.

First, it will allow for instant international transactions at low or no cost to the sender, with little risk of fraud or third-party intervention.

In addition, it can also be used by users to settle large transactions without requiring banking relationships or moving large amounts of money across borders.

Finally, and perhaps most importantly, blockchain technology will give financial institutions a viable alternative in an increasingly competitive marketplace.

Hope now you know, tracking sovereign adoption of bitcoin, how it is essential to potential investors or traders in this digital era.