France to Spend €100 Billion on Inflation Between 2021-2023: Implication for Crypto

Crypto Regulation
France to Spend €100 Billion on Inflation Between 2021-2023: Implication for Crypto

The French government announced its intention to spend €100 billion to buffer inflation’s effect on citizens, which has a major effect on crypto.

France Is Not Exempted From the Global Inflation

The Minister of Finance for France, Bruno Le Maire, announced on Monday, October 10, 2022, that the country would be spending about €100 billion to protect its citizens against the impact of inflation. Many countries in the world are experiencing an economic crisis, especially in Europe. 

France is not left out of this economic crisis, as the country is also experiencing inflation. In August 2022, the country’s inflation rate was 5.8%, which was better than its neighboring countries, whose inflation rates stood at 7.9% in Germany, 9.1% in Italy, and 9.9% in the UK. The consumer price index measures the inflation rate.

By 2023, the French government would have spent about €100 billion ($96.99 billion) over the space of three years to help citizens cope with rising inflation. He says, “Overall, in 2021, 2022, and 2023, we will have spent €100 billion to protect our citizens against the price hike.”  

In a recent development, the French MPs today, on the 11th, approved a €20 billion package to help with soaring inflation. This is part of the government’s effort to alleviate the effects of inflation on its citizens.

It is speculated that this inflation will have a ripple effect on Bitcoin and other cryptocurrencies. The inflation rate is expected to increase the price of cryptocurrencies due to increased adoption by governmental and non-governmental entities worldwide.

The Global Inflation Trend

Inflation to the loss of buying power of a currency over a given period. As a result of inflation, the cost of goods and services increases. It also increases living costs as buying the same goods and services becomes more expensive. In the United States, the core Consumer Price Index (CPI) rose 6.8% in the last 12 months, causing a spontaneous increase in gas prices, food prices, and housing market prices. The high energy cost caused the price of commodities to increase further in 2022, reaching highs of 9.1%

A combination of the COVID-19 pandemic and the energy crisis associated with the Russia-Ukraine war has resulted in large-scale financial instability across the globe. Policymakers have had to implement policies and restrictions to combat inflation, which has a ripple effect on businesses and supply chains and results in a global economic issue. 

Possible Effect of the Inflation on Crypto

Inflation might likely result in further crypto adoption. The popularity of crypto assets has continued to increase worldwide and is expected to experience increased adoption.

With a weaker euro, people may prefer to have their cash in Bitcoin and other cryptos to preserve their spending power. This, in turn, will make those cryptocurrencies still more valuable. 

The supply of bitcoin is fixed; there can only be 21 million bitcoins worldwide. This fixed supply makes bitcoin a hedge against inflation. In 2020, during the COVID-19 pandemic, central banks lowered interest rates, causing major inflation. As a result, there was a colossal migration of institutions and hedge funds from traditional to current digital assets. They reacted to this by buying large amounts of Bitcoin and other cryptocurrencies, hedging against inflation and taking advantages of price swings.

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