The Issues Of Crypto Adoption In Post Soviet Countries

News, Opinion | September 4, 2019 By:

Post-Soviet countries were always looked upon by their European and Asian contemporaries as the ones with the biggest potential for growth, but unfortunately, that has not been the case at all.

Although several countries like Poland and the Czech Republic that had even deeper ties with Western European countries such as the UK, the USA, and France managed to break through the hardships of Post Soviet life and are now considered developed countries, most of the others are still left behind in the classification of developing nations.

But, there have already been multiple analysis pieces about how easy it is to find one’s place as a crypto entrepreneur in a developing nation. But there was one small detail that was overlooked. Whenever a crypto venture is being made in a developing nation, it’s guaranteed to fail sooner or later unless it starts covering the global markets as well.

Furthermore, most analysts focus on ventures that are funded or backed by international exchanges such as Binance or Coinbase, which is not really a correct assessment when looking at a country’s potential for crypto.

With Post Soviet nations, there are even more reasons why this industry could face some issues, which we’re about to discuss right now.

Misallocation

The first issue to be discussed is the misallocation of resources that these countries have in terms of cryptocurrency adoption. We do indeed have some data about the blockchain’s presence in these countries but most of it revolves either around mass mining farms funded by local businessmen, or just small blockchain firms working on Dapps or smaller frameworks which they plan to release outside of the country.

When it comes to trading or using cryptocurrencies on local platforms, Post-soviet nations have a bit of a bottleneck.

According to a gambling compliance news outlet, Casinoreviewer.com, most of the Eastern European countries dedicate their crypto assets to online gaming platforms, which protects them from being monitored by their local banks.

These things are massively accepted in countries like Latvia, Ukraine, Georgia, and various other Central Asian nations.

The reason why it’s so popular is that crypto transactions to these platforms are not traced by the banks, which helps players avoid any unnecessary damage to their credit score due to gambling habits.

Bureaucracy

For a majority of these post-Soviet nations, independence is a “new” occurrence, therefore all of the administrative and jurisdictive processes have not yet been completed, which creates several issues for both local entrepreneurs as well as foreigners to fully tap into the markets.

For one, it’s a major risk for international brands to enter these markets, simply because it’s unpredictable and the political space is constantly changing, thus preventing any kind of stability in terms of crypto policy in the country.

For the local companies, there’s always the issue of how the government could tackle their operations and what kind of tax they can impose on them in order to run the industry dry. These may be emply allegations but more than enough companies have closed down due to pressure from government officials, who were seeking a cut from these brands in order to lobby their advancement in the state’s political organs.

Entrepreneurs are very unlikely to cater to “unconditional” demands from a person not literate in the blockchain industry, which caused multiple heads to butt and prevent major advancements in the industry.

The boogie man

Almost every post-Soviet nation has some kind of issue with Russia, which is arguably the strongest country to emerge from the Union, both military and economy-wise. There are only two exceptions, Belarus and Kazakhstan, which both have some positive economic or political connections with the Russian Duma, while others are trying to distance themselves as much as possible and become more affiliated with either the United States or the European Union.

For them, seeing how the blockchain is a vigorously developing industry in the Russian Federation, represents a threat to their own attempts at adopting the technology. Several politicians have been seen mentioning the blockchain as a front-door for Russian hackers in the country’s databases as well as financial institution reserves.

Yet again, the political uncertainty and pressure prevent a complete adoption of a crypto-fueled economy in this region.

Lack of skilled labor

Although post-Soviet nations like Belarus, Latvia, Estonia, and Ukraine are famous for their software developers, it doesn’t really mean that they have ones available in the country.

Yes, there are thousands of skilled programs residing in these countries, but their skills are way beyond the compensation most local companies can afford. This is derived from the mass outsourcing campaigns from local software companies who base their entire business models on servicing foreign entities.

Hundreds of blockchain projects have been created by post-Soviet country-based developers, but the founders were either from East Asia or Western Europe, very few advancements have been made in the countries themselves.

And even if international brands decide to have an office in these countries, very few are willing to compensate developers based on international standards, as the salary gaps and norms in these countries are relatively lower compared to both the West, and the far East.

It’s just too early

Many of these countries are still miles behind their Western contemporaries in terms of Fintech, which creates a gap in the development ladder for the blockchain.

In order for the local population to understand the importance of the blockchain, or simply understand why it’s being implemented, there needs to be a prerequisite knowledge of Fintech. Things such as mobile banks, Insurtech and various other fields in the Financial Technology industry are still needed to be made before such major “switches” in the local community’s sub-conscious are made.

The only country who’s been making progress on these issues is Estonia, as it immediately based most of its natural focus on technology.

Lack of public knowledge

Another major issue is public knowledge about cryptocurrencies in these countries. There are simply not enough people who know about the blockchain that would immediately decide to invest with a local crypto company.

Therefore, the crypto company would have to allocate some of its funds to spreading awareness about the blockchain first, before it could start spreading awareness about itself.

Will these regions ever be crypto hubs?

With the current state of cryptocurrencies, these regions actually have a lot of potential for cryptocurrency adoption, especially when it comes to supporting their fiscal and monetary policies.

Cryptos have amazing capabilities of maintaining the status quo for the local population as long as there is some kind of monetary issues with the fiat currency. We’ve seen how post-Soviet nations can be impacted by Russia’s actions in the economic standpoint of affairs, which usually cause slumps in the exchange rates.

Having a large reserve of cryptocurrencies not only on the institutional level but also at the retail level could potentially lead to the even larger crypto adoption.