Cryptocurrency and its support with inflation

Opinion

Cryptocurrencies are nothing new anymore, especially for developed countries like the United States or the United Kingdom, but several developing nations are just now starting to become familiarized with the blockchain and finding out the immense potential in the technology.

It’s sometimes funny to see how developed nations are quick to jump to assumptions that cryptocurrencies are very dangerous and that they will partake in illegal activity all over the world. Yes, cryptocurrencies have been noted to be used in things like drug trafficking, money laundering, and fraudulent investment schemes, but it’s important to note that 99% of all of these illegal activities worldwide is happening via fiat currencies at the moment.

Cryptos cannot be blamed for all of the illegal activities, that much is obvious, but several governments refuse to acknowledge the benefits of an alternative currency. Sure, most of them are starting to see the benefits of the blockchain, but that is not enough for complete adoption.

Combating with inflation

One of the primary advantages of high cryptocurrency adoption in the world would be the prevention of inflation. However, not every country could manage it to a point where it makes a difference. For example, the developed nations I mentioned above would have a hard time implementing cryptos as backup currency for hard financial times over all of that regulation.

However, developing nations have much more flexibility in that sense simply because the reserve isn’t too great in itself.

Let’s take one nation as an example. The country of Georgia, which has its own currency with multiple partnership deals and a large reserve of Euros, Dollars, and Rubles. Despite this so-called preparedness, the country still faces a lot of issues with combating inflation which is usually not even their fault. Recently, there was a major spike due to controversy with its biggest export market, Russia, which is a “political enemy” of the country as well. Very much like how the US and China are dependant on each other in a sense.

Anyways, the issue quickly became apparent, once the influx of US Dollars decreased significantly due to the controversy, the local currency started to depreciate and hit record low levels. The Georgian FX market was never active or anything, but once the fruits of the controversy became known, everybody started selling the local currency in exchange for the USD, which further impacted the depreciation.

Many experts have since said that should the country have had a significant reserve of a neutral currency, it would have handled the situation much better. The neutral currency they mentioned can be perceived as a national cryptocurrency or a nationalized altcoin in a sense.

Georgia is already quite capable of mining large volumes of cryptos, as it’s on the second place in terms of quantity. Therefore, having local crypto which it mines itself and distributes to the populace could always prove to be a safe haven once the fiat is in danger.

Multiple currencies like this could be added to the list. Things like the Polish zloty which is slowly but surely starting to become dependant on the Euros performance, or any other currency which is in direct correlation with a major currency.

What needs to be mentioned here is that the supply and demand will always change in uncertain economic times. If the government has a locally implemented, but decentralized safe haven, it could not only avoid disaster of an extremely depreciated fiat currency but actually have a plan B should things go further south.

Giorgi is a news reporter and financial analyst at www.forexnewsnow.com He has 3 years of experience in analyzing the financial markets of Forex and cryptocurrencies. He also likes making hidden jokes in his articles.