Disclaimer: Opinions expressed in this article do not constitute investment advice from Bitcoin Reserve.
Bitcoin is a stateless, politically-neutral, universally inclusive, disinflationary, and uncensorable currency that is bound to impact the nature of inter-governmental relations. After 11 years of development and hardening, Satoshi Nakamoto’s digital money is more than ready to disrupt international power structures and put the final nail in the coffin of colonialism.
For the first time in history, small and historically-oppressed nations have the opportunity to break away from the chains of global financial institutions, renegotiate their status on the world map, prevent and overcome crises, and bypass trade restrictions at will. In order to accomplish this series of ambitious goals, developing nations need to embrace bitcoins as a reserve currency. To further increase the national sovereignty and freedom of the state, citizens should also be encouraged to transact in BTC and even use it to pay taxes.
If financially-oppressed countries around the world replace US dollars, Chinese yuans, Russian rubles, and (to some extent) even gold bars with bitcoins, then they are bound to enter an era of unprecedented sovereignty and autonomy. Bitcoin transactions can’t be stopped for censorship, and the cryptography which secures BTC wallets is so complex that funds are unconfiscatable. Therefore, unlike other physical resources, bitcoins can’t be seized by invaders, thieves, and spies.
The limited monetary supply of bitcoins (only 21 million will ever exist) and increasing demand will definitely increase the market valuation of bitcoins and their appeal for traditional power actors. Nation states can definitely follow the trend to better protect their autonomy and hedge against the dynamics of global markets. Small, developing nations have no control over Wall Street, but recessions also affect their prosperity and monetary policy. With Bitcoin, this can change.
This article will expand on the concepts of nation state development through Bitcoin and coin security, in order to describe an inevitable scenario that we will observe in the coming years.
Who Are the Developing Nations and Why Do They Need Bitcoin?
The term “developing nation” (also referred to as “developing country” or “underdeveloped country”) has been coined by the United Nations and the International Monetary Fund to describe a nation state whose industrialisation level and living standard are still below the “First World” threshold. UNDP’s annual Human Development Index includes lots of other criteria which include life expectancy, human rights, and access to education.
However, all of these factors come back to resources and their distribution in the society: if both the citizens and the elites are able to live happy lives without worrying too much about money, then the entire nation becomes prosperous and creates a culture of equal rights and private property protection; but large gaps can lead to instability, unrest, social movements, and eventually regime changes.
The Gross National Income per capita is the main monetary indicator of development. If the amount in US dollars ranges between $1 to $995, then the nation state is considered among the “low income” ones. The next category is called “lower middle income countries” and includes countries where wages are higher than $996 and lower than $3895.
However, in situations of inflation and global financial crises, the amounts may greatly vary. When the US Federal Reserve flaunts its ability to print unlimited amounts of dollars, concerns for inflation and savings devaluation rightfully arise. Such a financial decision definitely impacts the way development indexes get measured, and indirectly affects countries around the world.
To better understand who the developing nations are, let’s enumerate them by region:
Developing nations from North Africa: Algeria, Egypt, Libya, Mauritania, Morocco, Sudan, and Tunisia.
Developing nations from Central Africa: Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea, Gabon, and Sao Tome and Principe.
Developing nations from East Africa: Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Rwanda, Somalia, Uganda, and the United Republic of Tanzania.
Developing nations from Southern Africa: Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Zambia, and Zimbabwe.
Developing nations from West Africa: Benin, Burkina Faso, Cabo Verde, Cote d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.
Developing nations from East Asia: Brunei Darussalam, China, Hong Kong, Indonesia, Malaysia, Myanmar, Papua New Guinea, Philippines, Republic of Korea, Singapore, Taiwan, Thailand, and Viet Nam.
Developing nations from South Asia: Bangladesh, India, Iran, Nepal, Pakistan, and Sri Lanka.
Developing nations from Western Asia: Bahrain, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Turney, United Arab Emirates, and Yemen.
Developing nations from the Caribbean: Barbados, Cuba, Dominican Republic, Guyana, Haiti, Jamaica, and Trinidad and Tobago.
Developing nations from Central America: Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, and Panama.
Developing nations from South America: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay, and Venezuela.
Developing nations from Europe: Albania, Belarus, Bosnia and Herzegovina, Bulgaria, Kosovo, Montenegro, North Macedonia, Moldova, Romania, Serbia, Turkey, and Ukraine.
When more than 120 nations around the world are considered underdeveloped, then we are dealing with an issue which concerns both inequality and a possibly faulty methodology. Definitely, reaching a uniformization of income and access to resources around the globe is utopian. But quantitatively speaking, almost three quarters of nation states are either underdeveloped or in the process of reaching a greater degree of development.
In terms of comparing world powers with developing nations, the methodology always seems to be unfair. If the criteria constantly change to include factors which naturally favor wealthy countries with well-established democracies and an excellent application of human rights and contemporary progressive standards, then developing nations will constantly lag behind. From this perspective, it can be said that the overall classification is designed to create high standards and push states to aim high – but in reality, a lack of resources and a challenge to deal with moving goal posts leads to a preservation of the status quo. Even if they make progresses, developing nations still remain in the lower tiers.
Yet Bitcoin can help bring some equilibrium in this situation. Thanks to its universal and neutral nature, developing nation states can use BTC to transact at fixed rates and allow their citizens to prosper regardless of external market conditions. A weightless and borderless version of gold that can be moved globally in a matter of minutes is definitely a disruptive factor. And the fact that no external political actor can operate monetary changes through inflation or arbitrary devaluation is also unprecedented.
Citizens empowered to own unconfiscatable sound money will also benefit from a better financial education and more autonomy to make decisions for themselves. The resulting smaller government will be more scalable and capable of dealing with issues. And ultimately, human development becomes easier to attain thanks to microeconomic development.
Nation states should also keep bitcoins as a reserve currency, accept taxes to get paid directly in BTC, and leverage their position to better negotiate their status in the region. Not being restrained by the volatility of another government’s fiat currency can be liberating. Renegotiating trade deals and regional peace treaties is also a benefit that Bitcoin unlocks. Also, building an economy around a currency whose inflation rate is predictable and fixed can bring lots of benefits in terms of long-term planning, sustainability, and predictability.
Bitcoin can put an end to short-time preference and allow developing nations to think on the long term.
With Bitcoin, Developing Nations Can End Colonialism
Most wars of independence were fought in the eighteenth, nineteenth, and even twentieth centuries. However, the removal of political control by hegemonic empires does not necessarily imply a state of sovereignty and self-reliance.
A closer look at the list of developing nations reveals an ugly truth: most of them are former colonies that are still in a relative state of dependency with the governments that colonized them until World War II.
What couldn’t be accomplished by force is more easily fulfilled through economic means. Trade wars, embargoes, tariffs, and sanctions are all powerful weapons of coercion that world powers use against their former colonies. And when economic control is accompanied by the use of a standardized national currency, then the relationship of interdependence grows and the independence further diminishes.
In many contexts, the interdependence can be great. Nation states use a widely accepted currency for trade and try to keep their own national currency as competitive as possible in order to keep a high living standard for their citizens and make better deals with imports.
However, when the regional or international reserve currency can be inflated by central bankers at worrying rates without relying on real value, then every nation state actor that uses the currency is going to get affected. And if acquiring an amount of the reserve currency has cost a developing nation half of their annual GDP while the central bank governing the said reserve currency has been able to print that exact amount of money in a matter of days, then the situation is unfair and detrimental.
In the second part of the 20th century, the largest majority of nation states have abandoned the Gold Standard in order to embrace fiat money governance. Under the promise of easily adjusting supply and demand to fix financial crises and recover from disasters, central banks have been empowered to control the money supply.
However, this politicization of money didn’t create more financial and political independence. It’s not like the central banks started adjusting the supply and demand according to their own criteria for wealth and value. The US dollar, the euro, the Russian ruble and the Chinese yuan have become international reference currencies in their regions. To some extent, it can be argued that they are weapons of neocolonialism because there are certain assets and commodities that can only be traded in the national currency of a world power.
But if money during the Gold Standard was based on provable wealth and value, today’s fiat is entirely guaranteed by inter-governmental debt. Transitioning from value to debt has created neocolonial relations of dominance which constrain monetary policy in developing nations.
Most of the times, countries take loans from the IMF and the World Bank to undergo certain long-term developing projects. But the terms of the loan are known to greatly restrict national sovereignty and constrain decision-making. In some countries, tax rates for citizens cannot be cut without consulting World Bank economists first. And this is not the kind of scenario that would have happened if countries held reserves in Bitcoin. In a Bitcoin economy, it’s likely that developing nations will no longer take loans and build markets and reserves that allow for autonomous long-term planning.
If Nation States Use Bitcoin As A Reserve Currency, What Are The Drawbacks?
Unfortunately, the modern fiat money system has also created military cartels between nation states. In exchange for accepting the supremacy of the US dollar on international markets and allowing US businesses to expand, developing nations also benefit from the indirect military protection of the United States (meaning that they won’t get attacked if they’re good actors).
But taking actions that erode the global or regional supremacy of the dollar, yuan, euro, and ruble will come with sanctions and possibly violent repercussions. At first, heads of state will point out to the “global village” vision for the world and call out those who try to separate themselves from the system which keeps them underdeveloped. Then they might try to stage coups, internal protests, media scandals, and other political movements that may undermine a government’s authority.
At this point, fiat money is a way of creating neocolonialism and interdependence. Being indebted to an empire means that you are obliged to have good relations over an extended period of time. It’s a form of diplomatic agreement which guarantees cooperation until the debt situation is settled. Nonetheless, it’s the kind of control that undermines nation state sovereignty and keeps developing nations poor and limited in their potential.
Accepting Bitcoin as a reserve currency and alternative means of exchange can be a great idea at this point only at a small scale and without too much noise. The danger of losing military support and potentially suffering a ravaging coup outweighs the benefits of using sound money before the unfortunate events unfold.
However, this doesn’t mean that developing nations should be scared and passive. If anything, they should try to hedge against the system which keeps them chained and wait for the day when something terrible happens to fiat money. It’s not just a matter of storing wealth, but a situation which concerns national security in case of disasters. Keeping a better form of money that can withstand crises is part of cautious planning, and nation states should hold at least a small percentage of their reserves in Bitcoin.
If the dollar, the yuan, the euro, or the ruble suffer an unfortunate fall from grace, then developing should not have to suffer. They should maximize their value and potential on the global market by holding the kind of money that is stateless and universal. And if gold traditionally fulfils this role, Bitcoin is quickly turning into a worthy contender that offers unprecedented advantages thanks to its immaterial nature.
In the future, neocolonial fiat money will collapse and leave room for gold and bitcoins to reign supreme. Until then, both citizens and their governments must be cautious and make sure they don’t rely too much on a system that may collapse like a house of cards when they expect it the least. Having trust in other countries that they will do a good job with their money and valuing your assets in that currency may be even more dangerous than holding small amounts of bitcoins to hedge against the system.