Kazakhstan, a Central Asian country that borders Russia and China, is giving a serious consideration for the benefits of crypto with proactive steps. In a positive news today, it was reported that first purchase of cryptocurrency was made with tenge, a Kazakh fiat currency. The country has launched a pilot program and continues to run it to test the demand for crypto and its security. This is a big step in a right direction that may produce some economic benefits for the country and its people. Kazakhstan' president Tokayev also shared some optimism, saying further demand could likely result in full legal recognition of digital assets. Full legal recognition can mean many things. It doesn't necessarily mean adopting bitcoin as a legal tender, like it was done in El Salvador.
This month we have celebrated the one year anniversary since bitcoin becoming legal tender in El Salvador. Unfortunately, it wasn't under the best market conditions. Some so-called analysts and economists may have portrayed Salvadorian bitcoin experiment as a failed attempt in reinventing country's financial system. There will always those who will criticize actions of first movers, as there isn't a comparison to be made. At least not yet. In a short term El Salvador may accrued paper losses on their investment in bitcoin. Thing also may have not gone as smooth as we would want to in this transition. However, there have also been many positives of this experiment, and the fruits of these courageous steps will one day be ready to reap.
Investments in bitcoin and alike are great for the preservation of wealth in an individual levels. True benefits of adopting bitcoin as a currency in a national level are not necessarily about gain made by hodling bitcoin, but rather in empowering the people of the country, so that they can do better. It also about building a robust economy, attracting investments and tourism which as result also contribute to the growth of the country and its people. I am sure El Salvador will see these benefits in near future if they haven't already started yet. One thing will remain true for the rest of the human history is that El Salvador was the first country who wasn't afraid of taking bold steps in embracing new vision for the financial system. Nobody can take away this from them.
Ever since El Salvador has adopted bitcoin as legal tender, the main question in everybody's mind has been Who Is Next? Some predicted a domino effect and slowly countries would do the same. These questions are easy to consider during bull market, when prices keep going up, and future seems to be great for bitcoin and crypto. Things are as easy when market makes a u-turn and pushes the prices in the opposite direction. There is doubt. There is fear. In such conditions it is easy to be distracted with all the negative news, and not see the actual developments, building, and the potentials of such innovative and revolutionary technology.
There are also those who would let anything cloud their judgement and always try to do proper research, conduct studies, listen to professional advice, true expert opinions in considering benefits and problems of crypto. I still have no doubt there are great benefits of bitcoin and crypto for countries, especially those with smaller economies. Due to the fact that decentralized networks are open and free for anybody to utilize, this kind of investment would require least amount of resources and funds. I think all countries should be carefully examining the benefits of crypto world and start building economies around them. But some are concerned with short term vision like current political trends, how to maximize taxing, how to preserve their fiat currencies. These are some of the obstacles government leaders will need to overcome to see the true benefits of bitcoin and crypto.
It seems to me Kazakhstan is one of these countries who has to consider the benefits of crypto versus preservation of their control over monetary system and keeping their fiat currencies relevant. The difference between Kazakhstan's journey to crypto and the one of El Salvador is that El Salvador found and chose bitcoin, while in Kazakhstan's case bitcoin found and chose this country. China used to the home of the bitcoin and crypto mining, and most of the mining was done there. When China decided to ban bitcoin and crypto mining, it didn't stop the bitcoin network. The beauty of this decentralized network is what individual countries decided doesn't matter, mining will find home elsewhere if it is not welcome anymore.
One of the countries mining moved to was Kazakhstan. In a very short period of time Kazakhstan became number two country in bitcoin mining and was responsible for 18.5% of total hash-power. That is impressive. China's mining ban turned out to be a gift for Kazakhstan. However, this phenomenon wasn't embraced by their politicians. In fact, they started finding ways how to regulate, tax, and create obstacles for the miners. I didn't even know that this country was number two on the list of global mining, until there was news of unrests in the country and when authorities decided to shut down the internet countrywide. This also became a big news in crypto, just because of the mining role they played and how shutting down internet would also interrupt mining activities.
It is great to see that, the leaders of the country are finally recognizing the crypto revolution and this time trying to do something good. Perhaps they are starting to see the benefits of keeping crypto miners and creating better conditions for them. Perhaps they see some benefits for the economy. It is too early to say what their true intentions and plans are for crypto. But it does seem like they are genuinely excited about the fact that now crypto can be purchased with Tenge, their fiat currency. As many other countries consider how bitcoin and crypto can be integrated into their financial system, economic activities, and social lives, I think the biggest challenge they will face the worry about the future of their fiat currencies. After all, bitcoin and crypto if used to fullest extent will ultimately make fiat currencies obsolete and irrelevant.
In retrospect, it wasn't a difficult decision for El Salvador to adopt bitcoin as legal tender. Because their fiat currency wasn't theirs in the first place. They have been using USD for a while, and USD doesn't have any benefits for El Salvador as fiat currencies normally would for a government. El Salvador had no control over USD and never benefited from more USD printing. It actually was the opposite. Giving up this invisible taxation by printing more fiat won't be easy for many countries who control their fiat, even they have no global recognition. Another benefit of having USD as legal tender in El Salvador is that buying bitcoin or crypto wasn't an issue. Bitcoin and crypto have always been traded for USD. Now if you have different fiat, and don't have market setup for crypto yet, chances are you would have to buy other fiat like USD or EURO to buy crypto. I can see why buying crypto with the local fiat currency is being celebrated in Kazakhstan. It is also a great step for making crypto accessible for the people of the country. The success or failure of this experiment will also depend on the regulations they will come up with and the limitations they put in place or remove.
I wish people of Kazakhstan the best in this crypto journey and hope this will produce excellent results for people. Let me know your thoughts in the comments.