Ongoing protests in Kazakhstan this week dealt a blow to Bitcoin as the cryptocurrency took a hit. The Central Asian country has in recent days seen violent clashes between protesters, police and the military, which were sparked by a fuel crisis. Kazakhstan is a strong player in the bitcoin world. Last year, the nation became the world’s second largest center for bitcoin mining after the United States, according to the Cambridge Center for Alternative Finance. This is not the first time that international politics and Bitcoin collide.
In September, history was made when El Salvador became the first country to accept Bitcoin as legal tender, making it the country’s official currency.
This week, the head of state – Neb Bukele – backed the value of bitcoin to reach $100,000 (£74,000) at some point over the next 12 months.
Mr Bukele also tweeted a series of predictions about Bitcoin, including “two more countries that will adopt it as legal tender.”
Expert Carol Alexander told Express.co.uk that Venezuela is another country that could follow El Salvador’s path.
“I wouldn’t be surprised if Venezuela went down a similar path,” she said. “The Bahamas also have a digital currency called the sand dollar.
“But Venezuela, and many other unstable countries, can do it. It’s likely to come from places in South America that have had inflation and horrific governments for years and years.”
Professor Alexander also explained how El Salvador made bitcoin an official currency.
She added, “They started by giving people bitcoin to trade in, and then they set up cash machines to trade in bitcoin.
“They can exchange it for dollars, but at the moment people seem to be keeping their bitcoins.
“It is very likely that Venezuela will be able to do this. There will be digital currencies for the central bank, and they have to come.”
Venezuela has already experimented with cryptocurrencies in the past.
This came at a time when the country’s Bolivarian currency had become useless due to hyperinflation.
In 2018, Venezuelan President Nicolas Maduro called “Petro”.
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A year ago, he claimed that this would combat a US-led financial “blockade” – the US imposed sanctions on Venezuela in response to corruption in the Caracas regime, although this measure has contributed to the country’s economic downturn.
Nigel Green of the deVere Group said that three more countries could adopt the cryptocurrency.
He said: “I am confident that the young independent president, Neb Bokhel, is right to have bitcoin legal tender in other countries in 2022.
“But I will go further than he did. I think it is likely that three more countries will follow the example of El Salvador, a pioneering future-focused in the digital age.
Low income countries have long suffered because their currencies are weak and very vulnerable to market changes and this leads to rampant inflation.
This is why most developing countries rely on major “first world” currencies, such as the US dollar, to complete transactions.
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However, relying on another country’s currency also comes with its own set of problems, which are often very costly. A strong US dollar, for example, will weigh on the economic prospects of emerging markets, as developing countries have taken over a lot of dollar-denominated debt in the past decades.
“By adopting cryptocurrency as legal tender, these countries immediately have a currency that is not affected by market conditions within their own economy, nor directly from the economy of another country.
“Bitcoin operates on a global scale and is therefore affected by broader global economic changes.”
Express.co.uk does not provide financial advice.