Crypto asset involvement in Latvia has experienced a dramatic 50% decrease over the past year, according to reports by the country’s central bank, Latvijas Banka. The institution’s 2023 “Financial Stability Report” illustrates the dwindling interest amongst the population towards digital currencies.
The chastening statistics, demonstrating only 4% of the population dabbled in crypto assets in February 2023, compared to an 8% involvement during 2022, is attributed to a series of factors. From fraud and insolvency rumblings among major market players to politically charged concerns over money laundering, the halving of participation reflects a downward sentiment towards the crypto market in Latvia. Furthermore, misspent investments and growing connections of crypto-asset companies to supervised financial participants have fuelled Latvian reticence.
In 2022, Latvians transferred approximately 51.8 million euros ($57 million) to crypto wallets. However, during the first quarter of 2023, this flux ebbed to a mere 10.7 million euros ($11.8 million). Surprisingly, most of these digital wallets were held with companies located in European regions emphatically developing new financial technologies, such as Lithuania, Estonia, Malta, and Ireland.
Yet, despite the declining interest in crypto assets, Latvia’s retail crypto payments “continue to prevail”. Many of these payments, however, are characteristically small, with 44% amounting to just 60 euros ($66) or less, and a staggering 97.5% accounting for under 1,000 euros ($1,100). The report, however, fails to provide the overall monetary value of these transactions.
On one side of the coin, statistics from Chainanalysis’s “2022 Geography of Cryptocurrency Report” ranked Latvia a dismal 92nd out of 148 countries in terms of crypto adoption. However, it is worth noting that the country’s nonbank financial sector remains “considerably less important” than that of other countries in Europe.
The core reason for this disparity is rooted in the low level of long-term savings among the Latvian populace. In contrast to many euro area nations, the Latvian population’s savings have accumulated over a relatively shorter period. This factor, combined with the scepticism around crypto assets, poses a significant quandary for the development of digital currencies in their financial landscape.
To conclude, while the positive pulse of retail crypto payments is encouraging, diminished public trust and the latent economic structure pose formidable challenges for crypto-asset adoption in Latvia.
Source: Cointelegraph
