Global cryptocurrency adoption is on track to reach around 750 million users by the end of 2023, according to the. Triple A.

According to the report, the top five countries with estimated holders are the United States, India, Pakistan, Nigeria and Vietnam with 46 million, 27 million, 26 million, 22 million and 20 million respectively. Vietnam’s ownership rate was 26% of the population and the United States at 13.2% of her.

The UK is undervalued, with an estimated owner of only 3.7 million, representing 5.5% of the population. But despite the lack of cryptocurrency adoption indicators compared to other countries, the UK’s ruling Conservative Party has indicated its intention to integrate digital assets into its economic plans.

In January, Treasury Secretary Andrew Griffiths spoke out about defending cryptocurrencies and blockchain technology to bring future economic benefits, despite the lingering fallout from the FTX collapse.

Griffiths said he intended to transform Britain into a sophisticated financial center. [has] Room for Cryptocurrencies and Blockchain Technology”.

The wording used by Griffith suggests that the cryptocurrency will be second only to the pound. But reading between the lines, could Griffiths be deliberately downplaying the importance of digital assets to the UK, especially given the depreciation of the pound?

british pound

The historian Anglo-Saxon From 410 AD to 1066 AD, 1 pound was equivalent to 1 pound (454 grams) of silver, a considerable fortune at the time.

But it wasn’t until then 1815–1920 And with the rise of the British East India Company, the British merchant trading house, the pound has risen among the world currency rankings to assume the role of reserve currency.

Under the Bretton Woods Accords, the pound lost its status as a reserve currency against the dollar, but it wasn’t until the 1970s, when US President Nixon “paused” the convertibility of the dollar to gold, that the pound’s depreciation became apparent. became.

of 1976Faced with a financial crisis, the UK government was forced to seek $4 billion in IMF loans. A surge in the balance of payments deficit, excessive public spending, and a four-fold rise in oil prices were among the factors contributing to the situation.

Adjusted for inflation, $4 billion in 1976 was $21.03 billion In today’s money – a cumulative increase of 426% over 47 years.

The chart below shows that in 1972 the dollar was worth about £2.60. $1 by his mid-eighties he plummeted to £1.10. This is partly due to a general decline in British industry, including the demise of the coal mining sector. , the strong dollar due to the significant tax cuts by President Reagan.

Declining global influence

In the late 1980s, downward pressure on the pound reversed as the country sought to redefine itself as a service economy, particularly with respect to financial services. However, the macro downtrend has resurfaced following the last recession that began in 2006.

Further downward pressure came in 2016 as the UK left the EU under the Brexit referendum. Most recently, Liz was to blame for the economic ignorance of his former Prime Minister Truss. She caused market panic because of her “small budget” of unfunded tax cuts. The pound plummeted to near its 1985 low.

pound to dollar
Source: TradingView.com

Not an isolated trend against the dollar, the pound’s value against other major currencies such as the yen, euro and yuan has also collapsed since the 70s. For example, in 1976 he could buy 700 yen for 1 pound. Today, the rate is close to his 150 yen, depreciating nearly 80%.

Pound vs Other Currencies
Source: TradingView.com

The pound’s decline has kept pace with Britain’s decline in influence on the world stage. Calling Britain and the pound shadows of their former selves would be a polite way of framing the situation – something Westminster is well aware of.

Why is the UK looking to digital assets?

Recently, the UK government has indicated its intention to regulate cryptocurrencies, recognizing their legitimacy within its jurisdiction.

a director On Feb. 1, the Ministry of Finance highlighted proposals to regulate financial intermediaries, including cryptocurrency exchanges, laying the groundwork for a friendly regulatory environment.

“These steps will help deliver a strong, first-of-its-kind regime that will tighten rules around cryptocurrency lending while enhancing consumer protection and corporate operational resilience.”

But to what extent are these actions guided by a sincere belief in cryptocurrency tenets? Incompatible with certain control structures.

The Treasury will probably be willing to cede some of its financial monopoly in exchange for potential economic gains from domestic cryptocurrency adoption. It may be based on the understanding that it increases.

As such, far from advocating for cryptocurrency doctrine, the UK is likely poised for mass adoption.

people are not satisfied with the financial system

Cracks in the legacy system began dating back to 1976, but the pound’s decline accelerated last year as silly monetary policies were implemented in response to the health crisis.

UK households are experiencing a significant drop in disposable income and everyday people are struggling amid a cost of living crisis. This makes it increasingly clear that the system is broken, even to ordinary people who are uninformed about finances.

In the past, Britons bought properties to combat inflation and currency depreciation.However, house prices 11 times Affordability is now well beyond sustainable levels compared to the average Londoner salary.

The lack of (traditional) options for saving money in an environment of declining purchasing power is fueling frustration with the financial system. In such situations, people will seek new options, including cryptocurrencies. So, the worse things get, the more adoption of cryptocurrencies.

It is very clear that developing countries, where financial inclusion and economic stability are generally low and sow economic discontent, account for four out of the top five estimated number of cryptocurrency holders.

On the cryptocurrency rubber stamp, the UK Treasury has inadvertently admitted that people are losing faith in the pound and the legacy economic system.

But to be fair, declining trust in local currencies is a problem facing all countries, not just the UK.

CBDC – Elephant in the Room

Bank of England Deputy Governor (BoE) Sir John Cunliffetold a special committee of the Ministry of Finance that the UK has a 70% chance of launching a digital pound Central Bank Digital Currency (CBDC).

Critics argue that CBDCs pose risks to privacy and could be used for financial manipulation by governments and central banks, especially in terms of restricting transactions and depriving people of the right to trade freely. .

Both private cryptocurrency and digital pound initiatives are calling into question the UK government’s vision of a sophisticated financial centre. The two are philosophically incompatible.

It remains to be seen how the Treasury will align its vision of a cryptocurrency hub with the digital pound.

By Jules

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