In situations where traditional financial instruments (TradFi) are unavailable, cryptocurrencies become an alternative, especially in developing countries with a young population. This conclusion was reached by analysts of the European Central Bank (ECB).
The study showed that the depreciation of national currencies contributed to the growth of Bitcoin transactions. The potential of stablecoins for widespread use by both individuals and companies as a financial alternative is also noted.
The analysis used data on Bitcoin transactions paired with 44 fiat currencies on the LocalBitcoins and Paxful platforms from January 2018 to April 2022. ECB experts identified an inverse relationship between the level of banking development and the frequency of cryptocurrency use.
The increasing popularity of Bitcoin and other cryptocurrencies is explained by several factors:
- Use as speculative assets due to the limited choice of traditional investment objects.
- Higher value compared to fiat currencies in the context of their weakening or high inflation.
- Application in international payments to bypass capital control and reduce transfer costs.
In 2022, the ECB stated that stablecoins are not suitable as payment instruments. It is also worth noting that in November, ECB President Christine Lagarde revealed that her son lost "almost all" funds invested in digital assets, despite numerous warnings.
