In a new report on Bitcoin, global cryptocurrency, and local driving factors, the European Central Bank (ECB) outlined three factors driving the adoption of crypto assets in emerging and developing economies (EMDE). One of these factors is that crypto assets can provide a store of value for people in countries with unstable local currencies, and the reasons are as follows:
Firstly, cryptocurrencies may be used as speculative assets, which can be particularly attractive for investors in countries restricted by regulatory or institutional factors.
Secondly, despite significant price volatility, these cryptocurrencies may represent a better store of value compared to the local currencies of countries with high inflation and depreciating exchange rates.
Thirdly, residents of emerging markets and developing economies can use cryptocurrencies as a means of cross-border transactions to bypass capital controls or reduce the costs of receiving foreign remittances.