bne IntelliNews – Crypto Finds Its Wings Amid Tough Times In Mongolia
It’s no wonder Mongolians are increasingly turning to cryptocurrency. Mongolia’s 3.3 million people are living through a third year of the Covid economy, as they are also beset by soaring gas prices, a plummeting currency and shortages caused by the economic effects of war in Ukraine.
Sundui, 39, Director of Coins (Operations) at Coinhub, explained how Mongolians use cryptocurrency to mitigate financial risk. “It is not a safe decision to keep money in tughrik savings in the bank when inflation is high. Inflation is 15%, savings 9% and prices are rising. But the reality is that you lose 6%.
Sundui’s sentiments were supported by many Mongols from various walks of life.
Naranbayar, a 21-year-old university student, said he started investing in cryptocurrency two years ago due to high inflation. “Inflation rate started rising rapidly one year after Covid-19 outbreak. And I started investing in crypto and local coins. This is a common reason for investing in crypto Mongolia even has the inflation hedge coin [IHC].”
“Mongols are investing in crypto,” said Minga Batsukh, co-founder and director of Blockrock Management. “They don’t want to put all their eggs in one basket, but crypto is one of the options, especially for young people. It has increased tremendously over the past six to seven months. The number of people talking about crypto is much larger than a year or two ago. And the numbers keep growing. »
Investing in crypto has not always been an option for Mongols. Minga first became interested in cryptocurrency in 2016 after talking to a colleague in New York. He shared how in 2017, when he started investing, “Mongolia didn’t have any platforms, and most people didn’t know what crypto was. I had to use foreign platforms from China or Europe.Now you can invest directly from Mongolian bank accounts, easily transferring money.
Mongolia’s first cryptocurrency was ArdCoin, which was issued by Ard Financial Group in January 2019. ArdCoin gave Mongolians the opportunity to exchange ArdCoin for Mongolian tughrik, US dollars or other cryptocurrencies such as Bitcoin and Ethereum. Having a local coin also offers Mongolians living abroad the opportunity to access their country’s financial markets. Some sources claim that up to 500,000 people, or one in six Mongolians, own ArdCoin. Sundui estimated that for all coins, the number could reach 600,000 active traders.
As of November 30, 2021, there were 12 cryptocurrency exchanges in Mongolia: DAX Crypto exchange, Coinhub exchange, Trade Exchange, Complex Exchange, Corex Exchange, Capex Exchange, National Crypto Exchange, Ebit Exchange, Stock Exchange, Retex Exchange, My Coin Exchange and Coinsea Exchange. While exchanges are traded online, many companies that operate them have physical addresses in Ulaanbaatar.
Mongolian investment in coins is directly correlated to the Mongolian calendar with a drop in investment during currency-intensive holidays such as Tsagaan Sar (Mongolian Lunar New Year), Valentine’s Day, Women’s Day and Mother’s Day. the man. During the pandemic, these vacations were canceled, so investments were high. In 2022, holidays were reinstated and investments fell.
Cheap money transfers
Although cryptocurrencies cannot be used to buy anything in the country, the Mongols have found other uses for them. Sundui said the Mongols used coins as a quick and cheap way to transfer money overseas. “The total time to receive an external fast USD transaction is two days, but crypto is only a matter of minutes and the cost is even lower. So it is more convenient to use crypto to make transactions. international payments.
Davaadorj, a 25-year-old UX/UI designer and social media specialist, is investing in crypto to grow and generate passive income. “The main reason I invest in crypto is because compared to stocks, in terms of indices, they grow much faster and are more profitable.”
The pandemic has accelerated cryptocurrency investments as many Mongolians have seen another way to earn money during the lockdown. Baasanerdene, 26, of Capex Exchange, said: “During the pandemic, the number of people who invested in crypto increased as people were staying at home and most of them were looking for ways to make money. money online.
As interest in cryptocurrency grows in Mongolia, domestic coins have posed a problem. The high penetration of ArdCoin is partly due to the fact that at least 33 companies offer ArdCoin as a bonus to their customers. These companies, which regularly buy coins to issue to customers, create a market and give the coin some liquidity. Lack of liquidity has been one of the main reasons why international cryptocurrencies are preferred over domestic coins.
Distrust of Mongolian coins is another factor that steers Mongolians towards international coins. Naranbayar, 21, a university student who invests in cryptocurrency, said: “Local cryptocurrencies are in a bit of a pickle right now. Because people invested, they lost a lot. Often, the majority of the time, people have lost money, which is bad… [An exception is] the IHC but now its price is down to 0.40 tughrik [a fraction of its previous value] and that just shows the true nature of local coins.”
The language barrier has made domestic coins more attractive to some as it is more difficult to access information on international coins; however, international parts are more profitable due to the size of the market according to Ariunjargal, a 52-year-old construction engineer who recently turned to international parts.
With coins such as Bitcoin losing up to 50% of their value in 2022, the Mongolian government has tightened cryptocurrency regulations. In particular, Mongolian coins are subject to scrutiny by the government. Legislation regulating the cryptocurrency industry, known as the Virtual Property Service Providers Act, came into force on December 14 last year.
At least 59 cryptocurrencies have been issued in Mongolia, but 21 of the coins have been banned under the Virtual Investor Law. However, 26-year-old Baasanerdene from Capex Exchange said that of the approximately 41 Mongolian coins that currently exist, only 17 are traded on Capex Capital. Sundui confirmed that there are 32 international coins and nine local coins in Mongolia.
Baasanerdene commented on government regulation saying, “Since the Financial Regulatory Commission [FRC] set a threshold, no new coins were issued. There are also crypto coins that are at risk of being removed. He recalled that on February 25, FRC legislation caused the suspension of several plays.
Since the Russian invasion of Ukraine in late February, many Mongols have stopped investing in crypto. “People react very quickly to war and different economic situations,” Baasanerdene said. The macroeconomic situation also spooked some investors. “And despite the large number of customers in the crypto market, the value of cryptocurrencies has depreciated and in these situations investors have been reluctant to invest to compensate for the risks,” Baasanerdene added.
Davaadorj agreed that pessimism has spread in crypto investments because of the war. “Since the beginning of the war, the market as a whole has been in freefall, making long-term trading impossible.”
Suldbayar, on the other hand, has increased its investment activity since the beginning of the conflict. “The war in Ukraine pushed me to invest more because saving money as a tughrik means losing value over time; it is advantageous if I convert it.
And therein lies the crux of the problem. In these difficult times, many, including Ariunjargal, continue to conclude that it is safer to hold their assets in USD tradable currencies.
Antonio Graceffo, PhD, China-MBA, is a Chinese economist and analyst who has spent more than 20 years in Asia, including seven years in China, two and a half years in Taiwan and two and a half years in Mongolia. He conducted post-doctoral studies in international trade, at the School of Economics of the University of Shanghai, holds a doctorate. from Shanghai Sports University and China-MBA from Shanghai Jiaotong University. Antonio is the author of seven books on Asia, including 3 on the Chinese economy. Over the past 10 years, he has covered the Chinese economy, the US-China trade war, investment, geopolitics and defense. Since 2019, Antonio has been based in Ulaanbaatar, where he continues his economic research on China, while reporting on the Mongolian economy. In addition to publishing regular reports and articles, he makes frequent television appearances as China’s economic expert on NTD TV, Bloomberg Mongolia TV and VTV.