Current Economic Situation in Laos
The economy of Laos is facing multiple challenges that have hindered growth and placed significant strain on household income. Laos' GDP growth in 2023 was estimated at 3.7%, with a projected rise to 4% in 2024.
However, growth remains below pre-2019 levels, mainly due to persistent macroeconomic instability and structural issues.
Key sectors such as tourism, transport, and mining contributed positively, yet underlying challenges continue to limit economic resilience.
Data Source: World Economic Outlook (October 2024) - Inflation rate, average consumer prices (imf.org)
High Inflation
A primary issue is high inflation, which averaged a steep 31% in 2023 and is expected to remain above 20% in 2024. This inflation is largely driven by the depreciation of the kip, which fell by 31% against the US dollar in 2023.
The sharp currency depreciation has escalated domestic prices, making essential goods and services less affordable, particularly affecting lower-income households.
According to World Bank data, over a third of households saw their purchasing power diminish, with many cutting back on health and education expenses.
Labor Market
The labor market is also experiencing strain, with many Laotians seeking work abroad due to limited domestic opportunities and declining real incomes.
Registered Lao migrants in Thailand increased by 15% from mid-2023 to early 2024, and labor shortages are appearing in sectors such as manufacturing and agriculture.
While foreign investment, especially in the electricity and mining sectors, has grown, more is needed to offset the economic burdens faced by households.
Public Debt
Laos' high public debt level is another barrier, with debt exceeding 110% of GDP in 2023. The nation’s dependency on foreign loans, particularly from China, has led to deferred debt payments but remains a heavy financial obligation that limits fiscal flexibility.
Laos lost access to the Thai bond market in 2023, reducing its ability to secure international financing.
Crypto Law In Laos
Image source: https://www.coindesk.com/markets/2019/02/21/430k-in-confiscated-crypto-to-be-sold-off-by-irish-auction-house/
Laos's regulatory approach reflects a cautious and selective stance on cryptocurrency involvement. In 2021, the Bank of the Lao PDR, the nation’s central bank, issued a warning to citizens and businesses regarding cryptocurrency transactions.
The Bank of the Lao PDR emphasized that cryptocurrencies are not recognised as legal tender and cannot be used as official payment tools within the country.
Additionally, the Lao authorities posit that foreign platforms like Binance are not regulated, and investors using these platforms face risks without the ability to pursue legal recourse in cases of fraud.
Despite the skepticism about cryptocurrency, the Lao government launched a pilot program that permits six authorized companies to mine and trade cryptocurrency within a regulatory sandbox.
This program, managed by multiple government agencies, aims to assess the potential economic benefits of cryptocurrency mining. The program is intended to generate revenue, projected to contribute significantly to the national budget.
Current State of Crypto Adoption in Laos
Crypto adoption varies across Southeast Asian countries, with some countries being global leaders in crypto adoption while others have negligible crypto-asset flows:
| Country | Crypto adoption |
| Lao | The user penetration rate is 3.13% in 2024, and the number of users is expected to reach 243,500 by 2025. |
| Indonesia | Ranked third globally and first in the region, with high year-on-year growth |
| Vietnam | Ranked third in the 2023 Crypto Adoption Index, and received the largest amount of crypto-inflows from 2020-2022 |
| Thailand | A global leader in crypto-asset adoption, and received US$180 billion in crypto-inflows from 2020-2022 |
| The Philippines | A global leader in crypto-asset adoption, and received US$110 billion in crypto-inflows from 2020-2022 |
| Singapore | Received US$120 billion in crypto-inflows from 2020-2022 |
| Brunei, Myanmar, and Cambodia | Recorded negligible crypto-asset flows from 2020-2022 |
Crypto adoption in Laos is relatively nascent compared to other Southeast Asian countries, with modest growth and engagement in the sector.
User Penetration
User penetration stands at around 3.13%, projected to decrease marginally to 3.11% by 2025, reaching an estimated 243,500 users.
The average monthly income per user is about between 900,000 and 1,200,000 Lao Kip ($100–$135 USD), indicating limited consumer spending on crypto compared to other ASEAN markets, where revenues and engagement levels are notably higher.
For instance, countries like Thailand, the Philippines, and Vietnam report substantial crypto flows and engagement. In contrast, Laos remains on the lower end, with limited participation in DeFi and stablecoin adoption regional trends.
Factors Driving Adoption
In Laos, several factors are promoting the gradual adoption of cryptocurrency, although the pace is more restrained than in other parts of Southeast Asia. These drivers include:
Remittances and Cross-Border Payments
Laos has a high rate of cross-border financial flows, with a sizable portion of the population working abroad, particularly in Thailand and other nearby countries.
Cryptocurrencies present a potentially cheaper and faster way for Laotian workers to send remittances home, bypassing traditional banking fees and long transaction times.
This appeal makes crypto an attractive option for remittance services in Laos, where financial infrastructure can be limited.
Financial Inclusion
Like much of Southeast Asia, Laos has a significant underbanked and unbanked population, especially in rural areas. Cryptocurrency and decentralized finance (DeFi) can provide financial services where traditional banking infrastructure is lacking.
This aspect of financial inclusion holds potential for the Laotian population, as crypto assets may offer a means for saving, investing, and transacting digitally without requiring access to traditional banking services.
Youth Demographics and Digital Literacy
Southeast Asia's younger demographic, especially those with access to mobile internet, is increasingly drawn to digital and decentralized financial tools.
In Laos, rising internet penetration and smartphone adoption create fertile ground for cryptocurrency interest, especially among digitally savvy youth who may find traditional financial systems restrictive or inaccessible.
Inflation and Currency Volatility Concerns
Some Laotians view cryptocurrency as a potential hedge against currency instability and inflation. Although this interest is more common in countries with higher volatility than Laos, a small segment of the population is exploring crypto as a store of value and protection against the potential devaluation of local currency.
Government Regulatory Support
Although Laos currently lacks a clear regulatory framework for cryptocurrency, the government’s recent move to permit crypto mining suggests a positive inclination towards digital assets. These efforts indicate official recognition of cryptocurrencies' potential economic benefits.
Alternative Investment Opportunities
In a country with relatively limited investment options, particularly for average citizens, cryptocurrencies offer new avenues for investment. While the market is nascent, the allure of high returns draws some investors to crypto assets.
The early-stage nature of the Lao crypto market presents growth potential, which could further attract both small retail investors and larger players as the market matures.
Cryptocurrency Usage in Various Sectors
In Laos, cryptocurrency adoption across sectors remains limited but is gaining traction in certain areas. Here’s an overview of how cryptocurrency is being applied in different sectors:
Finance and Banking
Though not yet widely adopted, crypto-based remittances are seen as a viable solution to address high fees and limited banking infrastructure.
As Laos has a substantial population working overseas, especially in Thailand, remittances are critical to the economy.
Some financial service providers have begun to explore cryptocurrency as an alternative to traditional remittance channels, offering faster and potentially cheaper cross-border transactions.
Tourism
The tourism sector worldwide is leveraging cryptocurrencies as a convenient payment option for travelers, particularly those from crypto-friendly countries.
Although not mainstream yet, this option provides convenience for travelers and helps to bypass exchange rate fluctuations and cross-border transaction fees, appealing especially to younger tourists who are more familiar with crypto.
Challenges Facing Crypto Adoption in Laos
Crypto adoption in Laos faces several substantial challenges that affect its growth and integration across sectors. Here’s a breakdown of these key obstacles and their impact on adoption:
1. Unclear Legal Framework
Although the Lao government has approved specific crypto-related activities, the regulatory framework still needs to be developed.
Only a few licensed crypto operations are currently allowed, primarily mining and trading on a limited scale. This controlled, cautious stance limits broader crypto usage and slows adoption across industries as businesses and investors remain uncertain about future regulatory changes.
See also: Regulatory Challenges in the Cryptocurrency Industry - UPay Blog
2. Limited Financial and Technological Infrastructure
A significant portion of Laos's population is underbanked or unbanked, which limits the accessibility of cryptocurrency as a financial tool.
While crypto could theoretically serve as an alternative for these groups, their lack of basic financial literacy and tech infrastructure makes it difficult for them to access or use crypto.
With sufficient infrastructure, it becomes easier for retailers or service providers to accept crypto payments and for consumers to use crypto conveniently for everyday purchases.
3. Low Public Awareness and Limited Understanding
Cryptocurrencies are still unfamiliar to much of the general population in Laos. Many people have a limited understanding of digital assets, blockchain technology, or the potential benefits of using cryptocurrencies.
This lack of awareness translates into low demand for crypto and limited pressure on businesses to adopt it as a payment method. The risk associated with cryptocurrencies also fuels the skepticism and low adoption rate in this region.
4. Market Volatility and Economic Concerns
The volatility of cryptocurrencies remains a significant deterrent. Many individuals and businesses view cryptocurrencies as speculative assets, not as reliable stores of value or practical currencies for transactions.
Sudden shifts in crypto value, especially if adoption increases significantly, could destabilize Laos's fragile economy. Government authorities are cautious about exposing the economy to such risks, which could exacerbate poverty levels and financial instability.
5. Challenges with Cross-Border Transactions
Laos has historically faced currency exchange and inflation issues, and crypto could either mitigate or exacerbate these problems.
However, adoption for cross-border transactions is only possible with stablecoin integration or regulatory measures to manage crypto-to-fiat conversions.
Many businesses need more time to engage in crypto payments due to the potential currency exchange risks involved.
The Potential for Cryptocurrency in Laos
With the right approach, Laos could leverage cryptocurrency to address economic challenges, streamline financial systems, and encourage innovation. Here’s an overview of the possible benefits and future trends for crypto adoption in the country.
Economic Growth and Diversification
Laos is landlocked and heavily reliant on cross-border trade with countries like Thailand, China, and Vietnam. With crypto, businesses could benefit from faster and more affordable cross-border transactions, reducing intermediary dependency and lowering transaction fees.
Neighboring countries like Thailand and Vietnam have seen notable investments in crypto startups and blockchain projects, showcasing a similar potential for Laos.
This could make Laos more competitive regionally by increasing efficiency and lowering costs for businesses engaged in international trade.
The industrial base in Lao PDR is still comparatively weak. Increased foreign capital and tech partnerships could help Laos diversify its economy.
Financial Inclusion for the Unbanked Population
According to a report by ASEAN Briefing, more than 70% of Laotians remain unbanked, lacking access to traditional financial services. Cryptocurrencies can act as a gateway to financial inclusion by allowing individuals to make transactions, access credit, and save in a secure and accessible format.
For many Laotians working abroad, sending remittances back home using crypto will be a game changer. Cryptocurrencies offer a faster, cheaper alternative to traditional banking channels, which can be costly and time-consuming.
For instance, El Salvador’s adoption of Bitcoin for remittances resulted in lower fees and faster transfers for its citizens. A similar approach in Laos could streamline the process for expatriates and improve the economic well-being of their families.
Technological Advancement and Digital Innovation
Broader adoption of crypto could position Laos as a hub for blockchain innovation in Southeast Asia. This would encourage the development of decentralized applications (DApps), digital identity verification systems, and blockchain-based supply chain solutions, which could modernize various sectors.
Countries like Singapore and Malaysia have embraced blockchain for supply chain management and digital identities, suggesting similar potential for Laos.
These advancements will benefit other sectors and lead to the development of a more digitally integrated economy. Improved infrastructure would also support e-commerce and mobile banking, further expanding economic opportunities for Laos.
Conclusion
Laos stands at a crossroads in its economic journey, grappling with significant challenges while exploring new opportunities. The country faces a high inflation rate, currency depreciation, and a struggling labor market.
While cryptocurrency regulatory restrictions remain, the government is slowly tapping into the potential of digital assets, though adoption still lags behind other Southeast Asian countries.
