As exciting as moving abroad can be, expats still face a number of challenges. One of their biggest concerns is accessing their money. You will be at the mercy of the local financial system and financial regulators, and central banks may not be on your side.
You may want to consider relying on bitcoin instead. A shocking number of citizens in small countries are using cryptocurrencies. As an expat, you may want to follow in their footsteps. Even if the country you are living abroad in isn’t suffering from political or economic instability today, it may still be a good idea. New problems can arise quickly, as the Eurozone debt crisis has shown.
Bitcoin is Slowly Replacing Fiat Currencies Around the World
Just a few years ago, many people believed that bitcoin’s only purposes were tax evasion, money laundering, and other illicit activities. Today, it has proven to be a viable alternative to fiat currencies. A number of small countries have considered relying on bitcoin and other cryptocurrencies over their own central banks. Consumers in other countries are using cryptocurrencies as alternatives due to problems with their local banking systems. These countries believe that relying on bitcoin can stabilize their economies in the years to come.
Here are some countries that are becoming more reliant on bitcoin or planning to phase out their own currencies altogether. People that are planning on living abroad should be aware of these problems.
In 2015, Nathaniel Popper published an interesting piece in the New York Times. Popper said that bitcoin is disrupting the Argentine economy in surprising ways.
The banking system has become dysfunctional due to overregulation and years of excessive quantitative easing. Many citizens have found that trading bitcoin is far more economical than using the country’s banks. “I think I understand economics better than most people because I grew up in Argentina,” Casares, now 41, told me. “I’ve seen every single monetary experiment you can imagine. This is the street-smart economics. Not the complex Ph.D. economics.”
The economy of Cyprus suffered a nearly fatal blow in 2013. EU lawmakers demanded that Cyprus banks tap into the accounts of their depositors to fund the recent bailout. Fearing a bank run that would cripple a small country’s financial system, the government began freezing customer bank accounts.
This ultimately destroyed faith in the Cyprus banking system. Customers had a very difficult time accessing their own money, so they needed to find other options to store it. Bitcoin actually proved to be more dependable.
Venezuela’s centralized economy has been cratering over the last couple of years. Patrick Gillespie of CNN Money states that the country is currently undergoing a massive hyperinflationary depression and the banking system is imploding.
“On Friday, $1 equaled 10,389 bolivars. Earlier this week, on Monday, it was worth 8,820 bolivars. At the start of this year, $1 equaled 3,164 bolivars, according to the unofficial exchange rate calculated by dolartoday.com, which millions of Venezuelans use. What’s worse: Private banks let Venezuelans take out only 30,000 bolivars ($2.88) from an ATM at a time. Government-run banks: 10,000 bolivars (96 cents).”
NewsBTC reports that the economic problems have spurred more people to move their money to bitcoin.
“Last week, nearly 11 million bolivar changed hands on LocalBitcoins alone. Keep in mind struggling economies also have a black market for other financial assets. It is possible the street value of bitcoin is very different from LocalBitcoins prices right now. A growing interest cannot be denied, regardless of how you want to look at things. Just the week before, the volume was around 8.8 million VEF. A nice growth, all things considered.”
Most countries that are shifting towards using bitcoin are third-world countries that are struggling from years of political instability and corruption. However, some larger, first-world countries are also making the transition. In November, Business Insider reported that Sweden could be the first major country to replace its fiat currency with a cryptocurrency.
Cecilia Skingsley, deputy governor of Sweden’s central bank Riksbank, announced the proposal after cash usage plummeted by 40%. Skingsley states that a growing number of people are using digital currencies, so it may be time for the central bank to get with the times.
“This is as revolutionary as the paper note 300 years ago,” Skingsley stated. “What does it mean for monetary policy and financial stability? How do we design this: a rechargeable card, an app or another way?”
If Sweden follows through on this idea, this will be the biggest change in the history of bitcoin.
What Can Expats Learn from these Countries?
Several countries have started shifting towards using bitcoin over their own fiat currencies. This is a major step that reflects some of the benefits of cryptocurrencies.
If you are planning on moving abroad to any other country, then you should pay close attention to these trends. They don’t only reflect the economic challenges that other countries are facing, they also prove that bitcoin has a number of advantages. Here are some things that investors in developed countries should be aware of.
Investing Opportunities as More Third-World Countries Adopt Bitcoin
If more third-world countries begin to phase out their own currencies in favor of bitcoin, demand will rise sharply. This will make it a great investing opportunity for other investors.
You should monitor developments in these countries carefully. It may be a good idea to increase your bitcoin holdings if more countries appear to be moving towards using bitcoin.
Using Bitcoin Can Be Cost-Effective if Financial Transaction Rates Rise
People in Argentina and other countries have traded bitcoin to minimize financial transaction costs. Their problems partially stem from infrastructural issues with their own financial systems, so they probably would become as bad in the United States or Europe. However, they are also caused by growing economic uncertainty. The banks have been forced to raise transaction costs to mitigate the risks of a bank run during a worsening economy.
Growing economic problems could cause financial transaction fees in developed countries to spike as well. If that occurs, trading bitcoin could be cheaper and more convenient than using traditional banks.
People that are planning on living abroad in a country with a smaller banking system need to be aware of the risks they face while using that local banking system. It could be a good idea to keep some money in bitcoin to reduce their dependence on local banks if financial fees rise.
Bitcoin Could be a Safeguard Against Government Corruption
The United States still has a fairly stable economy and fair regulations to protect consumer deposits. Expats don’t have the same protections in many other countries. Cyprus has shown that even the European Union doesn’t always respect the rights of its citizens. Things can be even worse in smaller countries run by corrupt dictators.
If you are worried about having your bank deposits seized or frozen by the local government, you should consider holding some money in bitcoin.
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