Revolutionize **Bitcoin Adoption**: Why **Spending Bitcoin** is Crucial for its Future

The cryptocurrency world often echoes with the rallying cry to “hodl” Bitcoin. Many enthusiasts believe they should hoard their “good money” (Bitcoin) and spend “bad money” (fiat). However, this approach significantly hinders genuine Bitcoin adoption. Carel van Wyk, CEO of MoneyBadger, argues that treating Bitcoin solely as a long-term savings asset, rather than a transactional currency, stifles its growth. Satoshi Nakamoto’s original vision for Bitcoin was a “Peer-to-Peer Electronic Cash System.” This article explores why spending Bitcoin is vital for its future, especially amidst evolving cryptocurrency regulation.

Beyond Hoarding: The Case for Spending Bitcoin

Many Bitcoin proponents misunderstand Gresham’s Law. This principle states that “bad money drives out good.” In today’s digital age, however, there is no inherent reason to retain bad money. The prevailing “hodl” strategy creates a fundamental problem. Specifically, in countries like South Africa, where local fiat currencies face challenges, Bitcoin becomes perceived purely as a savings vehicle. This directly contrasts Bitcoin’s foundational white paper, impacting its broad use. Consequently, this perspective contributes to Bitcoin’s lack of widespread transactional adoption.

Saving money always serves a specific goal. People save to buy a house, a car, or perhaps for early retirement. Even when saving “good money,” one typically converts it into fiat to complete these large purchases. Conversely, spending Bitcoin creates market demand. This encourages merchants to accept Bitcoin, thereby strengthening its utility. Furthermore, it makes Bitcoin appear more practical and useful to both individuals and regulators. This shift in perception is critical for its growth.

Consider Bitcoin’s current adoption challenge. Enthusiasts actively push merchants to accept Bitcoin. Yet, few actually spend Bitcoin. Frustrated merchants often cease accepting it due to low usage. For instance, South African payment processor PayFast accepted Bitcoin in 2014. They discontinued it five years later due to minimal transactions. Some suggest waiting for natural adoption as Bitcoin holders grow wealthier. However, if no one spends Bitcoin today, it will not evolve into generally accepted money tomorrow. Instead, it will remain primarily an investment vehicle. Regulators will then continue to restrict its use as currency. The “just wait” approach also implies hoarding Bitcoin while fearing short-term price drops. This effectively makes one short Bitcoin today. A more effective strategy involves both saving and spending. Maintain two wallets: one for savings and one for spending. This method also simplifies tax calculations.

Driving Real-World Bitcoin Adoption

Why should you bother spending Bitcoin if your primary goal is to build your fiat reserve? Using Bitcoin for routine purchases, such as groceries or coffee, reinforces its intended use as a cash system. As more Bitcoin owners engage in daily transactions, merchants recognize an untapped market of Bitcoin spenders. This encourages more businesses to offer Bitcoin as a payment option. Consequently, new avenues for Bitcoin penetration emerge. Wallet providers can also launch incentive programs. These might include discounts on spending, which drive additional sales for merchants. For example, one South African provider offered 10% back in sats for shopping at Pick’n Pay. Binance currently provides 50% back for QR-code payments at South African shops. Furthermore, direct Bitcoin payments save time and reduce costs. Users avoid exchange fees, bank delays, and conversion hassles.

A strong practical argument against spending Bitcoin involves tax calculations. Each transaction must be included in tax returns, complicating the process. In the future, tax authorities may adopt a more rational approach. The Australian Taxation Office, for instance, views crypto as an untaxed personal-use asset when used for day-to-day spending. This offers a potential model for other nations. In the interim, taxpayers in countries without such foresight have practical solutions. First, divide your Bitcoin into a savings wallet and a spending wallet. Second, utilize automated tax calculation software to track all your Bitcoin transactions. This simplifies compliance and satisfies regulatory requirements. These steps can significantly aid Bitcoin adoption.

Navigating Cryptocurrency Regulation and Identity

Many individuals and crypto influencers prioritize becoming wealthy in fiat terms. They often overlook Bitcoin’s original purpose. Bitcoin was designed as a neutral, open-source form of money. It aimed to be global, censorship-resistant, and permissionless. This fundamental design impacts how societies and governments approach cryptocurrency regulation. Physically spending Bitcoin at a grocer or coffee shop reveals its speed, ease, and empowering nature compared to fiat. Bitcoin payments often process faster than credit card transactions for the same purchase. Despite this, in October 2022, the South African government classified Bitcoin as a “financial instrument,” not as money. This classification largely reflects how most people perceive it. Kuben Naidoo, SA Reserve Bank deputy governor, stated, “We are not intent on regulating it as a currency as you can’t really walk into a shop and use it to buy something. Instead, our view has changed to regulating [cryptocurrencies] as a financial asset.”

This regulatory stance has consequences. Imagine buying a self-custody cappuccino without completing cross-border money transfer forms. Merchant activation projects aim to change this narrative. They enable real-world usage of Bitcoin. Spending Bitcoin thus transforms from a purely financial action into activism for monetary freedom. Currently, South Africa sees a continuous increase in crypto transaction volume at major physical retailers and online e-commerce stores. Bitcoin accounts for 67% of these transactions. Tether’s USDt (USDT) follows at 15%, XRP (XRP) at 8%, and Ether (ETH) at 4%. This trend is unsurprising. Geographies where Bitcoin serves most as a store of value and a medium of exchange often have local currencies at risk. This highlights the importance of real-world use over just treating Bitcoin as digital gold.

Digital Gold vs. Everyday Cash: A South African Perspective

In South Africa, residents face some of the world’s most restrictive currency controls. They also confront erosion of private property rights and promises of expanding government spending beyond economic capacity. These factors evoke fears of hyperinflation, mirroring events in neighboring Zimbabwe. Consequently, South Africans across all demographics seek alternative forms of money. They aim to insulate themselves from the slow, steady decline of the rand. An excellent example is the thriving circular Bitcoin community along the Garden Route. This area is one of South Africa’s key tourist destinations. Here, Bitcoin is not just digital gold; it’s becoming everyday cash.

The Regulatory Impasse in South Africa Crypto

Regulatory authorities’ one-sided views are already evident. Crypto payment service companies in South Africa have experienced license application delays since November last year. The Financial Sector Conduct Authority (FSCA) issues financial instrument licenses. However, it operates within guidelines that do not currently recognize crypto as a “means of payment.” It only sees it as a “financial instrument.” Many crypto payment service companies offer more than just wallets or exchanges. They also facilitate payments. Yet, no licensing regime currently exists for crypto payments. Therefore, the FSCA remains unsure of its legal authority to issue such licenses. Regulators are actively trying to resolve this impasse. The SA Reserve Bank’s National Payment System department is involved. This process, however, delays license issuance. Similarly, no final resolution exists on whether cryptocurrencies fall under South Africa’s exchange control policies. Court cases, like the current Standard Bank vs. SARB case, will likely continue for years. This regulatory uncertainty significantly impacts the potential for widespread South Africa crypto adoption.

Empowering the Future of Bitcoin Adoption

Bitcoin’s future usefulness brings to mind Charles Dickens’ famous opening line from “A Tale of Two Cities”: “It was the best of times, it was the worst of times.” We must decide our belief: Should Bitcoin be money, a speculative asset, or can it be both? If you believe in Bitcoin as money, use it as money. Save it and spend Bitcoin just like you do fiat currency. Owning Bitcoin that constantly increases in value but never using it is like owning a sports car you never drive. Nobody suggests spending your entire stack. Instead, view your savings wallet as your “number go up” stash. Then, consider your spending wallet as your “make a difference” fund. Do your part for the revolution. True Bitcoin adoption does not happen through hoarding. It happens through spending. You have hodled. Now, go spend.