Published May 27, 2024

3 minute read

The Ripple Impact of Bitcoin and Virtual Assets on Global Economies

The growing utilization of Bitcoin (BTC) and virtual assets presents new opportunities in the global economy. The largest adopters of this emerging industry are the 40% of the world's population residing in low-to-middle-income countries. This indicates that virtual assets could potentially have a transformative impact on the global economy.

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Bitcoin and virtual assets mark a major shift in financial services. They are changing the financial environment by providing an efficient and cost-effective payment process. 

Cryptocurrencies’ decentralised nature challenges traditional financial systems by allowing individuals to transact directly without the need for an intermediary like banks. Bitcoin is the first cryptocurrency that dominates the industry, closely followed by Ethereum, Binance, Solana, and Cardano. This model is working incredibly well for low-to-middle-income countries.

Interestingly, 40% of the world’s population lives in low-to-middle income (LMI) countries, thus signifying that these areas could be the biggest drivers of virtual assets. The growing attention from institutional players in developed countries during the so-called ‘crypto winter’, a market downturn period, indicates that a broader integration may be on the horizon. 

This double adoption–from grassroots users in LMI countries to institutional giants in developed markets–forecasts a growth in virtual assets that would accommodate the needs of various economic spectrums.

The Impact of Bitcoin and Virtual Assets on International Trade and Payments

The increased use of Bitcoin (BTC) and cryptocurrencies creates new routes in international trade and payments, eliminating traditional financial intermediaries. This transformation of trade logistics saves time and money for transactions, allowing for direct dealings between global parties. 

The blockchain technology that supports these transactions has unique benefits for small and medium-sized enterprises (SMEs) that were previously challenged by the intricacies of international banking. Today, such companies can go global with fewer challenges.

Using cryptocurrencies, businesses can operate more efficiently by saving efforts and costs from international transactions. The security and speed of crypto transactions provide the flexibility and assurance needed to function in a more digital-oriented and accelerating world.

Bitcoin and Cryptocurrencies’ Prospective Impact on the UAE

In the UAE, the world’s financial hub with a progressive government vision, cryptocurrencies have the potential to impact the economic scene significantly. The country’s transparency and straightforward regulations, particularly the Abu Dhabi Global Marketplace (ADGM)’s virtual asset regulations and Dubai’s Virtual Assets Regulatory Authority (VARA) framework, attract real market opportunities and promote innovation. 

Industry leaders such as Crypto.com, Binance, and ByBit have already opened their headquarters in the UAE. This drives the ecosystem forward in line with the UAE government’s vision of stimulating GDP growth through the digital economy, which presently adds 4.3% to the UAE’s GDP; however, this rate is expected to increase in the following periods, considering  40% of the UAE’s population uses government digital services more than once a week.

The UAE has continuously invested in the development of Web3 and is on its way to becoming a virtual assets hub. The DIFC Innovation Hub launch proved the initiative, with an ambitious $300 million money-raising target. Likewise, the Abu Dhabi Global Marketplace (ADGM) has positioned itself as a global leader in digital asset management with a progressive, risk-based regulatory system designed to support the growth of digital assets in the fintech space. The Hub71 global tech ecosystem offers a targeted support program for digital asset startups. Selected companies benefit from funding and in-kind incentives in return for equity. 

While banks in the UAE continue to apply a conservative approach to virtual assets for payments, remittances, and settlements, continuous development and a regulation-friendly environment will continue to attract global fintech companies and investors.

Bottom line: The Way Forward For Virtual Assets

Adopting Bitcoin and virtual assets into regulated financial operations will offer multiple advantages. The progressing virtual assets industry is set to alter the financial system and challenges companies in the UAE globally to reconsider their strategies in a digital-first economy.

Lately, the United Arab Emirates has promoted a conducive environment for its emerging virtual assets industry. Even though the industry was largely unregulated only a few years ago, the recent legislative steps show the government’s determination to prevent any irregularities that would compromise consumers’ funds.

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