When Inflation Undermines Trust: Crypto Adoption in the Global South Reveals a Failing Financial System
By Jiaren Song
March 2, 2026
(Credit: “Cryptocurrencies” generated using OpenAI’s DALL·E, March 2, 2026.)
Inflation as a Breaking Point
In 2023, Turkish President Recep Tayyip Erdoğan gave up his “Erdonomics” in favor of traditional economics. Before that, Erdoğan had pursued an unorthodox approach that kept interest rates artificially low despite high inflation, believing that cheap credit would stimulate growth and reduce inflation. After the policy shift, interest rates in Turkey shot up. They peaked at 50% and remained at 37% in February 2026, with annual inflation at 30.65%.
The same amount of money that buys meat today may buy only bread tomorrow. For many Turks, the instinct after receiving a paycheck in Lira is to convert it immediately into US dollars or gold.
Besides the US dollar and gold, Turkish citizens widely used an alternative, Tether (USDT), a type of “digital dollar” designed to maintain a one-to-one value with the US dollar. Because it is easily transferable and accessible through smartphones, it has become one of the most portable ways for people to hold dollar value. Turkey has emerged as the Middle East and North Africa’s largest cryptocurrency market, recording nearly $200 billion in annual transactions. This is almost four times that of the United Arab Emirates, which ranks second with $53 billion.
Crypto adoption in countries like Turkey is driven not by technological enthusiasm but by necessity, and this behavior exposes structural gaps in the global financial architecture. In many discussions, crypto adoption is imagined as speculation. Buying volatile tokens to chase high returns. But in high-inflation economies, a large share of everyday use looks different. It is less about the ideology of decentralization and more about restoring money’s basic functions: a medium of exchange for purchasing goods, a unit of account to measure value, and a store of value.
The Gaps in the Global Financial Architecture
The international financial system is largely composed of the International Monetary Fund (IMF) and the World Bank. They were established at the 1944 Bretton Woods Conference, where forty-four nations met for the first time to discuss a new international system after World War II. A new gold-exchange standard was established under which currencies were pegged to the US dollar, and the US dollar was convertible into gold at a fixed rate of $35 per ounce, which effectively ended in 1971. The conference promised monetary stability and liquidity during crises. Yet today, many Global South economies remain trapped in cycles of inflation, currency depreciation, and foreign exchange shortages. Crisis support can be slow, politically constrained, or expensive, and private capital often retreats precisely when stability is needed most. The result is a widening gap between what the global financial architecture claims to offer and what households actually experience: volatility and constraint.
Inflation is not always solely a domestic failure. While fiscal deficits and policy mismanagement matter, global conditions also play a role. Tight monetary policy in the Global North can strengthen the dollar and transmit the inflation pressure outward to weak economies in the Global South.
In environments where inflation remains high and economic policy appears inconsistent, public trust in government institutions weakens. The decentralized nature of crypto becomes appealing not because it is revolutionary, but because it cannot be easily frozen or arbitrarily controlled by domestic authorities.
Yet alongside its appeal, a common critique focuses on crypto’s environmental footprint. Many assume that stablecoins, as blockchain-based technologies, require massive computing power and energy and therefore cause significant environmental harm. However, as of 2026, only a small number of cryptocurrencies, such as Bitcoin, continue to rely on the energy-intensive Proof of Work (PoW) mechanism, in which miners (network participants) compete to validate transactions and secure the network by consuming significant computing power. By contrast, stablecoins such as USDT settle transactions on public blockchains. The networks with the highest USDT transaction volumes, including Tron (as of May 2025, $20 billion in daily transactions) and Ethereum, now use the Proof of Stake (PoS) mechanism, a consensus system in which validators are selected based on staked assets rather than computing power competition, and therefore consume significantly less energy. Their energy use per transaction may be lower than that of traditional financial infrastructure data centers. Integrating blockchain technologies into appropriate segments of traditional finance might be a way to improve energy efficiency and contribute to the net-zero objective.
The Risks Behind the Escape
At the same time, using crypto comes with risks.
Illicit use and capital flight: Alternative financial routes can facilitate unregulated outflows and complicate enforcement.
Monetary policy weakening: If households and firms shift to digital dollars, it can accelerate the growth of unofficial money, reducing the state’s ability to enforce monetary policy.
Unequal access and increased vulnerability: The ability to use crypto safely is not evenly distributed. Learning costs and internet access matter, and theft and fraud can easily hit when consumer protections are weakest.
With Trump's GENIUS Act, which requires stablecoin issuers to maintain 100% reserve backing with liquid assets like US dollars or short-term Treasuries, demand for US debt will increase, and the dollar’s status as the global reserve currency will be strengthened. This dynamic creates a structural problem: even when crypto appears “outside the system,” seemingly detached from dollar-dominated global financial order, it ultimately reinforces the system’s core. A strengthening dollar benefits the United States through sustained demand for its debt and greater financial leverage, but it can strain Global South economies by raising the burden of dollar-denominated debt, increasing import costs, and tightening external financial conditions.
Adaptation Is a Signal, Not a Solution
Beyond individual households turning to stablecoins as a way to preserve value, a similar crypto-adaptation is emerging at the state level. In December 2025, Pakistan invited Justin Sun, founder of Tron, and Changpeng Zhao, founder of Binance, to meet with Finance Minister Muhammad Aurangzeb. The high-level diplomatic treatment given to these crypto figures attracted global attention and signaled Pakistan’s openness to digital finance. Pakistan has explored tokenizing up to $2 billion in sovereign assets, including government bonds, treasury bills, and commodity reserves, in cooperation with Binance.
When a country faces fiscal pressure, foreign reserves shortages, and currency instability, it begins searching for ways to bypass traditional dollar-based financing channels. Crypto and asset tokenization become potential tools. If domestic currency lacks credibility, financing through dollar-pegged stablecoins may appear attractive. For overseas investors, this can mean avoiding exposure to local currency risk, settling transactions on-chain, and achieving faster liquidity. In theory, tokenized sovereign assets might seem more accessible than traditional bonds, but the underlying sovereign risk does not disappear.
And when governments and institutions fail to restore credibility or provide timely stabilization, individuals and governments alike begin adapting in their own ways. The turn toward crypto is not simply innovation. It is a response to eroded trust. One reason younger generations adapt quickly to these informal tools is that they confront instability in real time, and they will live longest with its consequences. When monetary instability becomes routine, waiting for institutional reform feels unrealistic. By the time reform arrives—if it does—trust has often already deteriorated.
Therefore, it is crucial to treat crypto adoption as a diagnostic signal, not a policy solution. If people are using stablecoins to preserve value and access dollars, the policy lesson is not encourage or ban crypto. The lesson is that the system is failing to provide accessible stability, affordable transaction ways, and timely crisis support, which it promised. When Erdoğan insisted that high interest rates cause inflation, many saw it as a political misjudgment. Yet the real question is what people do when they no longer trust the system.