Cryptocurrency adoption has been growing for a number of reasons. In emerging markets, enquiry suggests crypto remittances are a factor, although some argue that the idea of using cryptocurrencies for these transactions is null more than than a purist's dream.

The CEO of cryptocurrency derivatives trading platform BitMEX, Alexander Höptner, predicted earlier this calendar month that by the end of adjacent year, at to the lowest degree five countries will take accepted Bitcoin (BTC) as a legal tender, as crypto assets tin be faster and cheaper for remittances.

He believes that all five will be developing countries and that they would adopt cryptocurrencies considering of the growing need for cheaper and faster cross-border transactions, increasing inflation and growing political issues.

Various other commentators have suggested that Bitcoin and other cryptocurrencies are a solution to the high costs associated with remittance payments, equally a cryptocurrency transaction can be much cheaper than a remittance payment while settling in a shorter amount of fourth dimension.

El salvador was the first country in the world to prefer Bitcoin as legal tender with the country'southward Bitcoin Law officially coming into effect on September 7. The government launched a cryptocurrency wallet called Chivo that uses the Lightning Network, a layer-two scaling solution, to transact. The country has besides purchased 700 BTC over time.

Global remittances reached over $689 billion in 2022, and commissions were so high a $49 billion industry grew around them. To crypto proponents, El Salvador is a perfect instance of how cryptocurrencies tin can positively modify the world, but to others, volatility and a general lack of trust in the market brand cryptocurrency adoption impractical and unadvisable.

Are cryptocurrencies cyberbanking the unbanked?

With the Chivo wallet, Bitcoin could finer help offer financial services to Republic of el salvador'due south un- and underbanked population. The country'south president Nayib Bukele revealed in September 2022 that ii.1 million Salvadorans are actively using the wallet, despite the pushback against the new law that saw protests even fire a Bitcoin ATM machine.

Per his words, Chivo isn't a bank, but in three weeks gained more users than any bank in the land. That adoption may, notwithstanding, be related to a $30 in BTC airdrop El Salvador sent to every adult denizen with the authorities's wallet app.

Speaking to Cointelegraph, Eric Berman, senior legal editor of U.Southward. finance at Thomson Reuters Practical Law, said remittances using cryptocurrencies are a "purist's pipe dream." While Höptner pointed out that remittances made up 23% of Republic of el salvador's gross domestic product in 2022, Berman countered that only a fraction of the nation's businesses has taken a Bitcoin payment and that the government'due south cryptocurrency app has been plagued by technical issues.

Berman further added that "most of El salvador's $6 billion in annual remittances still comes via money transfers," as many are wary of the cryptocurrency's volatility. Because of the volatility'south impracticality, he said, Bitcoin hasn't been widely adopted as a payment method among merchants, adding:

"This impracticability is magnified exponentially for the disenfranchised and unbanked. No one wants to send mom $100 only to accept it be worth $80 by the time it gets to her."

Berman added that "rather than the populist uprising that BTC purists have been touting for years," Bitcoin'south adoption has instead been growing thanks to "some perhaps long overdue happy noises from U.S. and global regulators."

Indeed, the United States Securities and Exchange Committee (SEC) caput Gary Gensler has confirmed the regulator won't ban crypto. In fact, the SEC canonical the showtime Bitcoin futures-linked exchange-traded fund (ETF) in the Usa, ProShares' Bitcoin Strategy ETF, this calendar week.

Bitcoin'due south growing adoption and toll, Berman suggested, are the event of "institutional enthusiasm that is quite the antithesis of the grassroots movement for the disenfranchised and unbanked that spawned BTC over a decade agone."

Oleksandr Lutskevych, the founder and CEO of cryptocurrency exchange CEX.IO, seemingly disagrees with Berman'southward cess, saying El salvador's adoption highlights Bitcoin every bit "replacing the traditional, centralized rails used for remittances."

To Lutskevych, Bitcoin's infrastructure is existence adopted to also promote the transfer of stablecoins on meridian of its network, ensuring the cryptocurrency'south volatility won't affect remittances. El salvador's move, he said, promotes financial inclusion past helping cut down remittance costs.

Adoption out of "pure necessity"

In emerging markets, crypto proponents suggest adoption may be a result of "pure necessity," as the transaction fees paid on nigh blockchain networks dwarf the fees paid to some remittance vendors.

According to Lutskevych, information technology's "abundantly clear in the rationale behind Bukele's campaign that made BTC legal tender" that the nature of the movement was to drive BTC adoption forward through remittances. Lutskevych went on to add further:

"One of the master reasons why the state passed such legislation was to lower remittance costs, promote fiscal inclusion and boost GDP by leveraging BTC and its transfer infrastructure to promote fiscal inclusion."

Per his words, the adoption of new engineering is often the result of "pure necessity," and that may be the case with Bitcoin and cryptocurrencies in developing nations whose populations are heavily affected by remittance costs, which according to Markus Franke, a partner at cross-edge crypto payments firm Celo Labs, averages 6.38% and tin can often go over 10% of the amount existence sent.

Driving his point forward, Lutskevych added that the Chainalysis Global Crypto Adoption Alphabetize for 2022 shows that out of the top xx countries by cryptocurrency adoption, two-thirds are "developing countries with a high percentage of GDP coming from remittances."

He added that developing countries are now recognizing the value of "BTC's scalable transfer infrastructure, combined with Bitcoin's audio money properties and decentralization."

Lutskevych also noted that Bitcoin's Lightning Network capacity is upwards over 25% since El Salvador's Bitcoin Law came into effect, while the number of payment channels routing payments on the network besides moved up significantly and began a "parabolic tendency correct around the time of the constabulary condign effective."

To him, growing peer-to-peer (P2P) trading volumes in countries like Nigeria suggest cryptocurrencies like BTC are playing a role in "getting foreign money into the country."

Franke added to the line of thought, saying cryptocurrencies tin can be programmed, allowing for more complex financial operations without third parties. These features, Franke said, take seen remittance giants take an interest in cryptocurrencies.

As an example, he pointed to MoneyGram launching USDC settlement using the Stellar blockchain, and added that the Asian Development Bank has revealed services similar Ripple, Mobile Coin and bKash helped "deliver faster settlement, greater operational efficiencies and more competitive foreign exchange rates during the COVID-19 pandemic."

Amr Shady, CEO of business-to-business payment and financing platform Tribal Credit, told Cointelegraph that Mexico could be some other example of a country adopting cryptocurrencies for remittances, as estimates have shown they could reduce costs by fifty% to xc%.

It all comes down to numbers

If, indeed, five countries do adopt Bitcoin or any other cryptocurrency as legal tender, adoption seems likely going to keep on growing. Emerging markets rely on remittances and the use of stablecoins appears to exist a feasible solution to the volatility of crypto assets like BTC.

Projects like Facebook'due south Novi are already using stablecoins to facilitate cross-border transactions, with the project's marketing efforts having a heavy focus on remittances. Central depository financial institution digital currencies (CBDCs) may offer similar inexpensive transactions that volition assist users move money across borders at a low cost.

Related: Asian CBDC projects: What are they doing now?

The problem with these two solutions is the central entities behind them who can easily start discriminating, and for example, geoblock users. Decentralized blockchains are working on scaling to adapt thousands of transactions per second, bringing down remittance costs. Add in stablecoins, and the only matter blocking mass crypto adoption could very well be the specific cognition needed to navigate dissimilar blockchains and understand how addresses work.

User-experience improvements have for long been moving addresses and blockchain navigation to the back while helping users focus on payments. Once the apply of blockchain technology happens behind the scenes at a low toll, remittances will inevitably turn to crypto. Yet, those transactions may exist years away.