How Cryptocurrencies Can Mitigate Some of Brexit's Negative Effects
Brexit, the European divorce saga that has been going on for years, has created a lot of headaches for politicians and ordinary people on both sides of the Channel. The process of Britain leaving the European Union is now heading towards another one of its deadlines while London and Brussels are trying to separate with an agreement. U.K. Prime Minister Boris Johnson vowed there will be an exit on October 31, deal or no deal. Brits and their Euro neighbors are bracing for another jolt in the continent’s economic and financial system. Cryptocurrencies, independent of centralized political decisions, can provide some stability and utility in these uncertain times in the fiat world.
Also read: Here’s How Europeans Can Deal With Negative Interest Rates
Britain’s Exit From United Europe
Britain’s relationship with Europe has never been straightforward or unambiguous. “Fog in Channel, Continent Cut Off” is a newspaper headline that was probably never printed but it very well describes the British attitude towards the mainland. And it’s not like Europeans haven’t given as good as they’ve gotten. United Kingdom’s entry into the European Economic Community was vetoed twice by France, in 1963 and 1967, with General De Gaulle citing the British hostility towards European construction, lack of interest in the common market as well as the economic differences that in his view made Britain incompatible with the rest of Europe.
However, at the time the majority of the British people and their political representatives wanted to join what has since become the European Union. They achieved that at the third attempt, years after De Gaulle’s resignation and death, with the U.K. becoming a member of the European Communities (EC) on Jan. 1, 1973 and confirming its full membership in 1975, in the nation’s first referendum. Back then, all major political parties, the mainstream media, and most importantly the majority of Britons supported the continuation of membership – over 67% voted to stay in. Besides, London managed to negotiate a list of opt-ins and opt-outs of key European policies including the Schengen Agreement, the Economic and Monetary Union, the Area of Freedom, Security and Justice, the Charter of Fundamental Rights, and even win the U.K. rebate.
Another poll on Britain’s EU membership decades later produced a quite different outcome, though. Over half of the electorate that took part in the referendum on June 23, 2016 (51.9%) voted in favor of leaving the European Union. Despite the non-binding nature of the referendum, the British government kept its promise to implement the result. David Cameron, leader of the Conservative Party and British prime minister at the time, who campaigned for remaining in the EU, resigned and was succeeded by his home secretary Theresa May in the summer of 2016. She initiated the EU withdrawal process on March 29, 2017, which was expected to complete within the next two years. Britain triggered Article 50 of the Treaty on European Union.
Deal or No Deal, That Is the Question
Britain’s second female prime minister stepped down in July after the withdrawal agreement her cabinet reached with the EU was rejected three times in parliament earlier this year. She was then replaced by her former Foreign Secretary Boris Johnson whose government continued the negotiations with Brussels. Johnson, a leading figure in the Vote Leave campaign, stated that the United Kingdom would exit the European Union on Oct. 31, 2019, regardless of whether a deal has been reached by that date or not.
With British lawmakers blocking a no-deal Brexit, however, Johnson proposed a general election on October 15 but the motion failed. He also asked the Queen to prorogue parliament from September 10 in an effort to prevent parliamentarians from stopping the exit without agreement by narrowing the window in which they could do so. In the meantime, a string of court cases have challenged the prime minister’s actions. In the absence of a written British constitution, this could create legal confusion.
Brexit has sown discord in British society and posed questions about the future of the European Union in general. Euro skeptics and pro-Europeanists span the political spectrum in Britain. While the major political forces, the Labour Party and the Conservative Party, each have their claims regarding the terms of the agreement with the EU, the Liberal Democrats, the Scottish National Party and other factions directly seek a reversal of Brexit through a second referendum on the matter.
Brexit’s Economic Impact
There is a widespread consensus among economists that Britain’s decision to leave the European Union is already negatively affecting its economy. The costs associated with the vote result and the withdrawal process amount to between 2 and 2.5% of the U.K.’s gross domestic product, according to various studies conducted last year. Analysts have calculated that inflation rose by 1.7% in 2017. Other estimates suggest that the country could have lost another 1% of its national income during the same period, while some long-term analyses put the future annual losses at up to 9% of GDP.
At the same time, proponents of Brexit point out that the United Kingdom is the second-largest net contributor to the EU budget, after Germany, and after Brexit it should register serious savings that could translate into tax cuts for its residents or increased government spending on social programs, for example. Official figures show that in 2014, the country’s contribution was £14.4 billion (around €16 billion at the current exchange rate), after the rebate. Britain gave the EU €11.5 billion in 2015, or over two times the contribution of France.
How Cryptocurrencies Can Help Brits and Europeans
One of the biggest impacts Britain’s divorce with the EU is likely to make has important socio-economic and even humanitarian aspects. Aside from economic issues such as low income and unemployment, opposition to immigration and expectations that the U.K. will regain full control over its borders after the withdrawal were among the most motivating factors for voters in the Leave camp. Many of them are competing for low-paid, unqualified jobs with Eastern European guest workers.
Brexit, especially if it happens without a comprehensive deal with Brussels, will certainly limit immigration flows from countries in the European Economic Area, as it will curtail free movement between the Continent and the United Kingdom. However, according to an analysis conducted by the Migration Policy Institute, Great Britain will continue to accept around 500,000 immigrants annually and official statistical data indicates that immigration from outside the European Union has already increased. Net immigration is projected to be at least 200,000 people each year, despite the U.K.’s departure from the EU.
Newcomers and those EU immigrants who choose to stay in the United Kingdom, especially if a deal with Europe allows them to retain their employment rights, will continue to send money to family members in their home countries. Despite Britain being a member of the EU, it never adopted the common European currency, the euro, instead keeping its national fiat, the British pound. As a result, money transfers within the fiat system involve currency exchange and additional bank charges. The separation from the European Union is only going to complicate things further for anybody sending money abroad.
Cryptocurrencies offer the easiest and cheapest way to send remittances home. You don’t even need a third party to transact with digital money. All that the sender and receiver must have is a crypto wallet, such as the Bitcoin.com Wallet which supports both bitcoin cash and bitcoin core.
In the past few years, Britain, which is one of the world’s financial capitals, has become a hotspot for the growing fintech industry. Leading European companies dealing with digital assets are now based in the U.K. And although in the aftermath of the Brexit referendum some have taken steps to establish a presence elsewhere in the EU, like Revolut which announced plans to open offices in 19 European countries, the crypto sector is likely to maintain and expand its presence in the country which has a very well developed financial infrastructure.
Revolut, which develops online banking solutions, provides its clients with instant access to five cryptocurrencies, including BCH, and offers exchange services in its mobile app. Users can transfer digital coins between each other. Other Britain-based companies of note are Wirex and Cashaa. Wirex is the most popular crypto debit card issuer in Europe. Its platform lets you spend cryptocurrencies anywhere Visa is accepted through instant conversion to fiat and to withdraw cash at ATMs around the world. And Cashaa provides you with a U.K. current and euro bank accounts supporting both traditional and digital money operations.
Thanks to startups like these, crypto banking is becoming a viable alternative to traditional finance. And in the future, the troubles of the fiat system are likely to have a positive effect on cryptocurrencies, whose strengths stem from their decentralized nature. If you live in Britain, Europe or anywhere else, and you still haven’t entered the crypto space, you can do so safely and securely by acquiring your first coins at buy.Bitcoin.com. You can also freely trade your crypto assets on our noncustodial, peer-to-peer marketplace local.Bitcoin.com, with thousands of other users or try our recently launched trading platform, exchange.Bitcoin.com.
Do you expect the number of cryptocurrency users in the U.K. to increase after Brexit? Share your thoughts on the subject in the comments section below.
Images courtesy of Shutterstock.
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