The global economy is on the edge of a deep and prolonged recession. The news is grim from growing inflation, skyrocketing energy prices, war in Eastern Europe, and uneven recovery from the COVID-19 pandemic. The result is falling asset prices and the real possibility of a global food crisis. It’s not just traditional markets that are taking a hit. Cryptocurrencies, including major coins such as Bitcoin and Ethereum, have seen major sell-offs in line with falling markets. Many of these assets were meant to act as a hedge against inflation but that hasn’t been the case. This has led to panic across the crypto community, but two markets haven’t felt the sting in the same way: The UAE and the Baltic countries. As a result of their relative insulation from the current dips because of long-term thinking, these countries are in an enviable position to use this crisis as an opportunity.
These countries aren’t stressing about the market downturn because they have invested in the underlying technology underpinning cryptocurrencies at the state level. Estonia leads the way, investing substantial resources into blockchain technology to run its government. The technology provides a digital ledger of transactions held on hundreds of thousands of computers that is virtually unhackable. Estonian citizens interact with their government through digital interfaces secured on a private blockchain. This makes the services run more efficiently and makes the country more secure.
Given their checkered history with Russia, the Baltic states have used blockchain technology to set up systems that enable their governments to function remotely. In the case of a Russian invasion, the political leadership can access their private blockchain and the reins of power from anywhere. When blockchain is this integral to the fabric of government, the price of Bitcoin doesn’t cause many earthquakes.
While the UAE hasn’t needed to take such extravagant national security steps, the country has recently embraced blockchain technology. In 2016, the Dubai government unveiled a bold blockchain strategy that called for the rapid integration of government services and blockchain technology. This manifested in initiatives such as the paperless strategy that saw various government offices move away from paper to transactions securely stored on a blockchain. While the ambition is there, implementing this new blockchain world has come in fits and starts. Even for small countries like the UAE moving systems to a blockchain takes time.
The UAE has also been reticent to allow for unfettered access to cryptocurrency by citizens and residents. While you can now buy and sell cryptocurrency with relative ease, it wasn’t always this way. The slow uptake of crypto, coupled with the relatively large amount of expendable cash among locals, might have something to do with the UAE’s relative insulation from the mayhem in the crypto markets. What is apparent in all of this is that the UAE sees blockchain technology (and cryptocurrency to a degree) as a crucial part of creating its knowledge economy.
As the government continues to embrace other aspects of a modern knowledge economy, from the metaverse to agricultural technology, blockchain will continue to feature prominently, the price of a Bitcoin notwithstanding. Creating the world’s first ministry of artificial intelligence, which also has a blockchain mandate, should help the transition. Let’s not forget that the UAE is a critical hub in the global remittance market. As more remittances move to the crypto space, the UAE will likely unveil its coin or digital currency to remain on top of this lucrative economic sector.
What does this mean for the UAE and the Baltics’ attitudes about the current dip in crypto prices? Well, it should be clear. Countries that invested in blockchain infrastructure projects with a long-term horizon have less concern about the short-term crypto price fluctuations. The UAE is also home to substantially more capital to buy the crypto dips, but that diverts from the more significant point.
The price of the world’s leading cryptocurrency, Bitcoin, is impressively volatile. In the last year, it has gone from a high of roughly $67,000 to its current lows of around $30,000 per Bitcoin. This sort of price variance won’t likely end anytime soon. This reality shouldn’t cloud the potential of blockchain technology to transform how we live and interact with each other. The underlying technology is going mainstream as more investors and governments understand the lasting power of blockchain. In smaller countries with nimble legislative environments, the ups and downs of the crypto market haven’t slowed the process of bringing blockchain to the mainstream. As crypto markets continue to cool, these small countries will enjoy the lion’s share of innovation in the blockchain world. There is an excellent opportunity in the current market downturn, and in a few years, it is unlikely many will remember this blip on the radar.
Joseph Dana is the former senior editor of Exponential View, a weekly newsletter about technology and its impact on society. He was also the editor-in-chief of emerge85, a lab exploring change in emerging markets and its global impact.