Home Bitcoin Is Brazil Headed For Bitcoin Drama?

Is Brazil Headed For Bitcoin Drama?

396
0
SHARE

 

The world has watched in astonishment throughout 2017 as bitcoin has reached values of several thousand dollars. As of mid-December the cryptocurrency has begun to flirt with a $20,000 value in fact, and many people belive it could be climbing higher in the near future. For a lot of investors who bought in early, and even those who simply want to see digital currency play a big role in society, this has been a welcome bull market. For others, however – including those who play influential roles in regulating traditional fiat currencies – bitcoin is beginning to look somewhat more threatening.

As you may have seen, Brazil’s Central Bank chairman recently called bitcoin a Ponzi Scheme. He did explain this in fairly conventional financial terms, suggesting bitcoin is “a financial asset with no ballast that people buy because they believe it will appreciate.” This, as he notes, does describe a fairly ordinary pyramid scheme structure – though it also speaks to a fundamental truth that, so far, is paying off for bitcoin advocates. There’s really no contradicting his statement; rather, there is simply wondering how long the appreciation will continue, and whether bitcoin may continue to have value for investors even if we’re en route to a bubble bursting eventually.

What’s interesting is how this position from the Central Bank contrasts with the general trends in cryptocurrency in Brazil. Just last year, before bitcoin became the major asset it is today, we saw analysis indicating that bitcoin was set for a “boom” in Brazil. Not only have we already seen that several South American countries have embraced bitcoin (or at least their citizens have), but the size and diversity of the Brazilian economy seems to lend itself well to bitcoin adoption. As one piece put it, the growth of small- and medium-sized enterprises has created a fertile ground for mobile payments, likely set to encourage companies and consumers alike to adopt cryptocurrencies. The indication here is that bitcoin is poised to grow in influence in the country.

This appears to set up a sort of clash between the Central Bank and the natural economic progress of the country. And it’s worth noting that South America has also had a little bit more drama than most other parts of the world when it comes to bitcoin regulation. Bolivia and Ecuador are among only a handful of countries that have banned bitcoin usage, and while that has no specific bearing on Brazil, it does establish something of a precedent for the region. That is to say, a government challenging bitcoin’s legality or restricting its usage is by no means unheard of, particularly in this general part of the world.

It all sets up an interesting showdown between an economy and citizenry naturally poised to adopt bitcoin at a quick rate and a Central Bank that would rather not see it happen. As of this point there is no evidence that restrictions on trade or adoption will be put into effect. But it’s something to keep an eye on.