Cryptocurrencies like Bitcoin are ‘apolitical’ says financial expert
Over two million adults in the UK are believed to hold cryptocurrencies such as bitcoin. The figure has increased sharply in the last decade, with the world of crypto opening up to average workers in recent years through apps like Coinbase and eToro. While many have cashed in on the craze, the Bank of England has repeatedly warned that the emergence of cryptocurrencies could pose a danger to the established financial system.
Officials there say that, as the currencies become mainstream, more people invest without regard to the risks involved.
The volatile nature of crypto markets means that if their value fell sharply, it could have a knock-on effect.
Some countries fear that crypto could shake the status quo so much that they have banned the currency outright.
China, Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia and Bangladesh have prohibited its use within their borders, with 42 other countries having implicitly banned crypto exchanges.
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Despite this, many believe that in an ever-increasingly digital world, cryptocurrencies in at least some form are likely here to stay.
Some political analysts suggest that other governments could eventually welcome the cryptocurrencies.
Wolfgang Münchau, a German political analyst writing in Euro Intelligence, predicted that the UK will be at the helm of the new crypto-finance sector.
He said he believed that just as the UK has become one of the leaders in attracting investment for high-tech start-ups, so too will it pave the way for digital currencies.
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Mr Münchau wrote: “Payment services, financial services passporting, and open banking stand for this innovation.
“I would expect crypto-finance to be the next big sector to attract investment.
“This, too, will be a UK story first and foremost.
“Other sectors that attract investments are semiconductors and online commerce.”
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At the end of 2021, the continent had received over €870billion (£726billion) in crypto in the past year.
Countries in Central, Northern and Western Europe (CNWE) accounted for 25 percent of all global cryptocurrency activity.
The UK saw the largest volume of crypto trading in the CNWE region, around £121billion.
This was followed by France, Germany, the Netherlands and Spain.
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At the same time crypto translation volumes increased in Europe, volumes plummeted in East Asia — the previous crypto world capital.
According to Chainalysis, a blockchain data platform, Europe’s growth was largely driven by so-called “whales”, large institutional investors shifting enormous sums of cryptocurrency.
In a report, it said: “CNWE’s cryptocurrency economy began growing faster in July 2020.
“At this time, we saw a huge increase in large institutional-sized transactions, meaning transfers above $10million (€8.5million; £7million) worth of cryptocurrency.
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The firm’s data shows how significant that growth has been: in July 2020, large institutional transfers totalled around €1.2billion (£1billion).
By June 2021, that figure had ballooned to €39.6billion (£33billion), at which point the whales accounted for over half of all crypto transfer volume in the CNWE region.
The report found that the majority of these institutional transactions in Europe went to decentralised finance platforms (DeFi) which have been embraced by large investors as they offer ways to stake cryptocurrencies.
Only one country in the world has officially classified Bitcoin as legal currency: El Salvador.
President Nayib Bukele, tweeting about the landmark event last June, wrote: “It will bring financial inclusion, investment, tourism, innovation and economic development for our country.”