The Latvian central bank, known as Latvijas Banka, recently disclosed a significant decrease in the number of individuals purchasing crypto assets within the country, according to their “Financial Stability Report” for 2023.
According to the report, only 4% of the population acquired crypto assets in February 2023, compared to 8% in the previous year. Additionally, this drop can be attributed to various factors, including concerns about fraud, insolvency, money laundering, and regulatory risks.
The report, which analyzed payment card usage data, revealed interesting insights about Latvians’ digital wallet transfers. In 2022, they sent 51.8 million euros ($57 million) to these wallets. However, this figure dramatically dropped to just 10.7 million euros ($11.8 million) in the first quarter of 2023.
Most of these transactions were directed towards companies in other European countries that boast a more advanced crypto ecosystem, such as Lithuania, Estonia, Malta, and Ireland.
Unfortunately for Latvia, it ranked relatively low in terms of crypto adoption according to Chainalysis’s “2022 Geography of Cryptocurrency Report,” where it secured the 92nd position out of 148 countries surveyed.
In contrast, its neighbor Lithuania fared slightly better at the 102nd spot. Moreover, the report emphasized that Latvia’s nonbank financial sector holds less significance compared to other European nations due to the population’s limited long-term savings.
Retail Crypto Payments Still Popular
The report revealed that 44% of retail payments made using crypto were valued at 60 euros ($66) or less, and a staggering 97.5% of them were for amounts under 1,000 euros ($1,100). Surprisingly, the monetary value of these payments was not specified in the report.
Furthermore, it highlighted that certain Latvian banks have started offering services related to digital assets such as custody and exchange. Nonetheless, cautionary words were also shared concerning potential risks to financial stability and consumer protection if these services are not effectively supervised and regulated.
The Latvian central bank has adopted a cautious stance towards digital assets, issuing multiple warnings to the public regarding their associated risks and challenges. In 2022, it unequivocally stated that cryptocurrencies are not considered legal tender due to their highly volatile and unpredictable prices.
The central bank also advised consumers to exercise caution when engaging with crypto-related companies and emphasized the importance of verifying licenses and reputations. However, amidst this cautious approach, the central bank recognized the potential benefits of crypto technologies.
It actively supported innovation and development in the sector by launching a regulatory sandbox exclusively for fintech companies utilizing blockchain and other emerging technologies. Furthermore, it collaborated with other central banks and the Bank for International Settlements on a cross-border digital currency project.
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