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This is an audio transcript of the FT News Briefing podcast episode: Why developing countries are so keen on cryptocurrencies

Marc Filippino
Good morning from the Financial Times, today is Tuesday, September 7th, and this is your FT News Briefing.

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Marc Filippino
Boris Johnson is set to announce a major tax rise today. And the military coup in Guinea has people worried about aluminium production. Plus, many developing countries are finding cryptocurrencies appealing. And the biggest experiment starts today in El Salvador.

Jonathan Wheatley
This is not some Mickey Mouse country, alright? It’s a small country in Central America. It looks a bit bizarre that it’s doing this, but this is a test case.

Marc Filippino
I’m Marc Filippino. And here’s the news you need to start your day.

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Marc Filippino
Today, UK prime minister Boris Johnson will announce a tax rise of more than 10 billion pounds. The money will go toward emergency support for the NHS. It will also go to gradually reforming the UK’s social care sector. But the FT’s political editor, George Parker, says members of Johnson’s own party are pretty unhappy with the idea of a tax rise.

George Parker
The Conservatives made a promise to the electorate in 2019 that there would be no increases in taxation or the main rates of taxation. That would be a blatant manifesto breach. Second thing is they like to think of themselves as a party of low taxation, although the record shows that at the moment the tax burden in the UK is the highest it’s been since the late 1960s. So so it’s quickly shedding that reputation. And the third thing is the way this tax rise will operate. Basically, it’s a tax paid by all people on their income, but it doesn’t include payments for rental income or dividends. And also it doesn’t apply to people aged over 66. That means that the people most likely to receive social care in the short term, at least not, will be paying anything more either. And what’s the purpose of this? Well, the government is gonna introduce a cap on the amount anyone can pay in their lifetime for social care of about 80,000 pounds. Now, the objective of that is to stop people having to sell their house if they have to face catastrophic costs for social care. You can see the criticism of that policy that you’re asking people on low incomes. They’re probably renting a property, being asked to pay more. So the people who live in houses worth a million pounds can pass their home on to their privileged children. Doesn’t look equitable. It’s not equitable, but Boris Johnson nevertheless is going to plow ahead with it because he thinks it’s unavoidable that tax, some sort of tax is gonna have to rise is going to be this extra cost.

Marc Filippino
George Parker is the FT’s political editor.

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Marc Filippino
Guinea’s military said they had overthrown the country’s 83-year-old president Alpha Condé on Sunday. He was elected in 2010 and won a controversial third term last year. Guinea is the world’s second-biggest producer of the raw material bauxite, which is needed to make aluminium. And the news of the coup set the price of aluminium on Monday to its highest level in a decade. The FT’s West Africa correspondent Neil Munshi said the leaders of the coup are trying to calm the fears of industry leaders around the world.

Neil Munshi
On Monday, the head of the junta tried to sort of reassure the global mining industry by saying that the ports would still be open for export, that the mining companies in the country should continue to operate as usual, and the airports would be open again. And he said all this was in order to ensure the continuity of production, which kind of underscores the importance of the mining industry to the economy in Guinea.

Marc Filippino
Yeah. Neal, can you explain a little more about the significance the mining industry has in Guinea?

Neil Munshi
So mining and you know bauxite production in particular makes up the bulk of the country’s exports and it’s incredibly important to the country’s economy. But at the same time, it has over the years been the subject of allegations of gross corruption involving major mining companies from all over the world and politicians. And it hasn’t done much at all for the people of Guinea who remain some of the poorest people in the world.

Marc Filippino
Neil Munshi is the FT’s West Africa correspondent.

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Marc Filippino
Twenty years after it adopted the US dollar as its national currency, El Salvador will today become the first country in the world to make Bitcoin legal tender. Those in favour of the move say it will cut the fees Salvadorans pay to send home remittances, which represent one quarter of the country’s GDP. Critics say the rushed plan could cost poorer Salvadorans dearly when the price falls and provide a shield for money launderers. But whether you think it’s a good idea or a bad idea, it’s happening. And the FT’s Jonathan Wheatley says crypto isn’t just popular in El Salvador. It’s really gaining traction in a lot of developing countries.

Jonathan Wheatley
What we’ve seen is that acceptance becomes adoption becomes quite high in places where people don’t necessarily trust the national currency. So a currency has to act as a means of exchange, as a store of value and as a unit of account. And in all those aspects of use, emerging market currencies are often flawed. You often get runaway inflation or unpredictable inflation that can go up and down quite quickly. You get very sharp and unpredictable movements in the exchange rate. It can be very hard to do things that, you know, some of us in advanced economies find quite easy to do. If I drive across Europe and get a parking ticket in Italy, when I get home I can pay it by bank transfer out of my checking account. And that kind of thing, if you’re in Lagos, is extremely complex and bitcoin and other cryptocurrencies make that an awful lot easier. And although obviously during the time that it takes to enact the transaction, the value can move very sharply and cryptocurrencies do move very sharply in value. Nevertheless, when you’re used to your own national currency moving extremely sharply in value, then that kind of risk becomes much more acceptable.

Marc Filippino
Now, Jonathan, the way that I understand it is that this isn’t necessarily new. Emerging markets have this tendency to adopt new technology early. Like cryptocurrency isn’t the first time we’ve seen this kind of transition in developing countries, right?

Jonathan Wheatley
No, absolutely. And in fact, you know, when a new technology comes along, they quite often tend to adopt it quickly because it allows them to leapfrog over the absence of a preceding technology. The example that we give is M-Pesa in Kenya, which is now in several other countries, which basically allow people without bank accounts to use their mobile telephone accounts as bank accounts. Basically the telecom operators operating as a bank. And that allowed the unbanked to become banked without bank accounts. And what some people are hoping is that not just with cryptocurrencies, but with a distributed ledger technology in the block chains, that’s one of the one of the applications of that that lies behind crypto, that other things might come along that would allow that kind of leapfrogging. The classic example would be land registry or property registry. In general, in a great many developing countries, there is almost no land registry at all and certainly very precarious land registry. So people don’t have rights over their own property and crucially, they’re not able to leverage that right into lending for investment and growth. So you’ve got a whole pile of dead capital in a lot of emerging economies that could be unlocked by functioning land registry or property registry more broadly. And the hope is among some that distributed ledger technology blockchain would allow that to happen.

Marc Filippino
Jonathan, just going back to El Salvador for a bit. You know, what are other countries looking at when they watch this experiment unfold?

Jonathan Wheatley
Well, one point that we that we reported in our in our Big Read was that this is not some Mickey Mouse country, alright? It’s a small country in Central America. It looks a bit bizarre that it’s doing this, but it’s it’s a democratically elected government. It’s not under sanctions from anybody. It’s a member of the of the IMF. It’s inserted in the international financial system. And, you know, one commenter that we interviewed made the point that this is a test case. I mean, we will see whether or not it’s possible for a country to accept cryptocurrencies and if it works or not, will be very, very interesting either way.

Marc Filippino
Jonathan Wheatley is the FT’s emerging markets correspondent. Thanks, Jonathan.

Jonathan Wheatley
You’re very welcome. My pleasure.

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Marc Filippino
Before we go, let’s take a trip to the cinema, Marvel’s first superhero with an Asian lead character has been all the buzz.

Audio clip
I thought I could change my name . . . This time in your life. But I could never . . . Let’s give a shout out.

Marc Filippino
Shang-Chi and the Legend of the Ten Rings made 90 million dollars in US ticket sales over Labor Day weekend. It makes Shang-Chi the most successful Labor Day release on record. The previous record holder was the movie Halloween. The release of Shang-Chi was a bit of a risk on Disney’s part. It was the first film from its Marvel studio subsidiary that debuted exclusively in theatres since the start of the pandemic.

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Marc Filippino
You can read more on all of the stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.

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