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The UK's position in the global bitcoin race

A critical look at the data-based claims of the adoption of bitcoin in the UK

The UK's position in the global bitcoin race

_{When discussing national-level grassroots adoption of bitcoin, it is necessary to begin with a caveat: the data currently available is far from perfect, for two main reasons.}

_{First, high-quality studies specifically focused on bitcoin are exceedingly rare; most try to gauge the broader levels of crytpocurrency adoption or ownership rather than segmenting out bitcoin adoption/ownership from the wider cryptocurrency market. This means that most of the data currently available is of a generalised nature, leaving us little choice but to make certain informed assumptions vis-a-vis bitcoin adoption.}

_{Second, trying to gauge adoption rates – whether for cryptocurrency as a whole or bitcoin alone – is far from easy since there is no official source of data, leaving researchers little choice but to resort to public surveys as their main information tool.}

_{The good news is that the most prominent studies tell a roughly similar story, which should give a certain degree of confidence in their findings. According to the 2024 Global Crypto Adoption Index by Chainalysis, which relies upon on-chain data and automated heuristics, the UK currently ranks 12^th globally in terms of bitcoin and cryptocurrency adoption.}_[xliv]

_{Another well-regarded study, published by Finder, a Canadian personal finance comparison site, suggests that 13% of Brits – equivalent to approximately 7 million adults – have invested in cryptocurrencies, and that just over half of those (3.9 million) own bitcoin.}_[xlv]

_{CoinShares’ 2023 edition of its Global Bitcoin Ownership Overview 2023 – which is essentially a rough meta-analysis of a selection of the best regarded studies – estimates that around two million Brits owned bitcoin in 2022, placing it 19^th on the CoinShares' ranking of countries by total number (not percentage) of bitcoin owners.}

_{Two million people equates to an adoption rate of around 3%, which is markedly lower than the rate cited by Finder and just slightly below CoinShares' estimated global adoption rate (3.2%).}

The real leaders

_{By contrast, the US has an adoption rate almost double that of the UK’s (6.2%) while Australia’s is roughly a third higher (4.1%). But when it comes to grassrooots adoption, advanced economies like the US, the UK and Australia are trailing behind emerging and frontier economies. For example, in CoinShares' top 20 ranking, only four economies are developed while the remaining 16 are either classed as emerging (10), frontier (i.e. economies that are less advanced than emerging ones, of which there are four) and stand-alone, of which there are two; Venezuela and Ghana.}

_{This should not come as a surprise. After all, emerging, frontier and stand-alone economies have, broadly speaking, seen even higher levels of inflation and currency debasement over the past few years than advanced economies, which further strengthens both the case and the need for bitcoin.}

_{As the CoinShares' report notes, grassroots ownership is concentrated where the need is the highest:}

_{“Three of the top five countries (Turkey, Nigeria and Venezuela) have not seen single-digit inflation rates in over five years and one has experienced hyperinflation (Venezuela). Many of the remaining countries on the list have suffered financial repression of varying severity, and have large populations of young, technologically savvy yet often unbanked populations.}

_{“To add some further context to the magnitude of these ownership percentages, according to Bloomberg, 3.7% of Indians are invested in equities, whereas our data suggests that almost 6.3% of Indians own bitcoin.}

_{“Without any other requirements than an internet connection and a smartphone, bitcoin gives users access to a whole range of financial services such as internet commerce, savings outside of local currency, international transfers, etc.}

_{"For a large proportion of the global population, access to financial services is severely lacking, making bitcoin an attractive method of accessing otherwise unavailable necessities.”}

The real leaders

_{India belongs to a grouping of countries classified by the World Bank as ‘low middle-income’ (LMI), and it is this precise group of countries, mainly from Asia and Africa, that is dominating bitcoin grassroots adoption rankings. LMIs include countries like Nigeria, Ukraine, Pakistan, Morocco, Indonesia, the Philippines and Bangladesh, all of which featured in the top 20 rankings published in 2023 by both Chain Analysis and CoinShares.}

_{This group of countries has seen a much stronger recovery in adoption rates since the crypto winter began in late 2021. In fact, LMI is the only group of countries whose total grassroots adoption remains above where it was in Q3 2020. As Chain Analysis notes, this bodes well for bitcoin’s future prospects:}

_{“LMI countries are often countries on the rise, with dynamic, growing industries and populations. Many of them have undergone significant economic development in the last few decades to rise from the low income group. And perhaps most importantly of all, 40% of the world’s population live in LMI countries, more than any other income category. If LMI countries are the future, then the data indicates that bitcoin is going to be a big part of that future.”}_[xlvii]

_{Most advanced economies may be lagging when it comes to bitcoin adoption, but they}_are_{the leading force for bitcoin transactions.}

_{The US is, perhaps unsurprisingly, number one when it comes to raw transaction value, having a total bitcoin transaction volume of just over $1 trillion in 2022, according to Chain Analysis.}

_{India and the UK round out the top three, each with an estimated $250 billion in transaction volume in 2022.}

_{Other notable players include Turkey, Russia, Canada, Thailand, Vietnam and Germany.}

Causes for optimism

_{As we see the global hash rate reach new highs, the number of nodes securing the network reach new highs, and study after study showing the ESG-positive impacts of bitcoin, there are causes for optimism, both at the global and national level. They include the recent explosion in institutional adoption.}

_{It is institutional, not retail, demand that drove the most recent rally in the bitcoin price. This was largely fuelled by the launch of bitcoin ETFs, according to Alex Leishman, founder and CEO of River Financial, a bitcoin-only financial institution catering to the needs of long-term investors.}

_{Between May 2023 and May 2024, River Financial saw a 43% increase in the amount of bitcoin held by public companies, says Leishman. Not only that, but the average bitcoin balance at River increased 60% between 2023 and 2024. In other words, says Leishman, “not only are more companies buying bitcoin, they’re buying more of it.”}_[xlviii]

_{This could soon be true of the UK as well. In March 2024, the Financial Conduct Authority finally opened the door to the creation of bitcoin asset-backed exchange-traded products, or ETPs – albeit not for everyone. For the moment, only professional investors will be able to trade these ETPs, leaving retail players out in the cold.}

_{As a result, many investors will continue to use overseas exchanges to buy bitcoin rather than being able to buy and sell bitcoin ETP’s, says Dr Tatiana Franus, a lecturer in finance at Bayes Business School.}_[xlix]_{While bitcoin ETPs may provide professional investors with an easy way to gain price exposure to this fledgling asset class, they do have a major drawback: counterparty risk. In other words, investors face the possibility, however slim, that the other party in the transaction may not fulfil its part of the deal and may default on its obligations.}

_{Over the past decade, the length of time bitcoin owners hold onto their coins has steadily grown, suggesting that the perception of bitcoin is evolving the longer it exists and the more established it becomes.}

_{Other UK-specific reasons for optimism include the fact that more and more businesses and charities are accepting payments or donations in bitcoin. The growing list of prominent charitable organisations that now accept bitcoin donations include}_{Save the Children UK, British Red Cross, Alzheimer’s Research UK, Community Foundation}_and_{The Turing Trust}_{. Many of the charities receive the donations and convert them into British pounds.}_[l]

_{However, as bitcoin becomes better understood, we expect these bitcoin donations to increasingly be added to the charities' bitcoin reserves.}

Retail payments

_{There are a number of reasons why charities are now accepting bitcoin. It is a great way to broaden their donor base, particularly by appealing to a younger audience that may not even be aware of the work they do. Bitcoin users, like many broad collectives, have tribal loyalties. When they realise that a certain charity offers the option of donating in bitcoin, not only are they more likely to donate to that charity but they are also likely to spread the word among their network of fellow bitcoin aficionados.}

_{“At Alzheimer’s Research UK we aim to be innovative,” says Megan Ruddlesden, online fundraising manager at the dementia charity. “So, pioneering new technologies and ways of working is an important part of who we are. By giving people the opportunity to support us through whatever means they can – including using cryptocurrency – we open the doors to new sources of income to fund our vital research for a cure for dementia.”}_[li]

_{A similar phenomenon is playing out on the British high street as more and more retail businesses accept payments in}_bitcoin_{. As in the charity world, fintech companies are stepping in to help streamline processes.}

_{A case in}_{point is the UK-based company Musqet, which offers retailers integrated debit, credit, contactless and bitcoin payment terminals that not only make it easy for merchants to accept bitcoin for goods and services without being a custodian of the merchant's funds but also offer lower card processing fees than most other payment terminals.}

_{It is a win-win for both retailers and their customers. The latter benefits from a more diverse choice of payment options while many retailers, like charities, are finding that offering bitcoin as a payment option is helping them to expand their customer base, particularly among younger adults.}

_{According to a recent study by Deloitte, a huge 93% of US businesses taking bitcoin payments report noticeable revenue growth and brand perception improvements.}_[lii]

_{Another area in which fintech firms are offering innovative financial solutions is in the roll out of bitcoin payroll and employee benefits services. Recent years have seen the emergence of specialist payroll providers that are enabling companies to pay their workers in bitcoin.}

_{The benefits for the companies involved include capturing young talent, since offering part-payment of salaries in bitcoin can appeal to bitcoin enthusiasts; lower operating costs; faster payments; and the potential for workers to receive inflation-busting salaries, which would inevitably translate into a happier workforce.}_[liii]