Cryptocurrency adoption has proven to be a lifeline in developing economies, where fast depreciating currencies and political instability have left individuals with few options.
The appeal of a totally decentralised financial system untethered to a government or the economy is obvious in these regions.Through the usage of cryptocurrencies, people in these places have acquired more control over their money, while access to capital has become easier.
Since 2009, a revolutionary new method of payment has taken the world by storm. The invention of Bitcoin instantly thrust cryptocurrency into the spotlight, demonstrating digital currencies and a revolutionised financial system based on a decentralised peer-to-peer payment system. The expansion of cryptocurrencies does not appear to be slowing anytime soon, and the increasing popularity of cryptocurrencies in developing countries is difficult to ignore.
A cryptocurrency, in short, is a decentralised digital currency protected by encryption. Cryptocurrencies do not have a central issuing or governing authority; instead, they record transactions and issue new units using a decentralised system based on blockchain technology.
There are thousands of cryptocurrencies, each with its own set of features and characteristics. However, Bitcoin remains the most popular blockchain-based cryptocurrency, with an anticipated 106 million Bitcoin owners and 200 million Bitcoin wallets in 2022. Cryptocurrencies captured the public’s interest – nothing like it had ever been seen before, and it promised to remove the inefficiencies associated with old financial systems, eliciting discussion and debate.
However in this article, we’ll talk about the adoption of Cryptocurrencies, financial inclusion, and how Crypto is driving financial inclusion towards empowerment.
Adoption of cryptocurrency in developing economies
Because of their prominence in the remittance sector, developing countries are among the most active consumers of cryptocurrencies. According to the World Bank, remittances — the money that migrants send back to family or friends in their country of origin – can account for up to 20% and even 40% of GDP in many poor nations.
According to the Digital 2022 Global Overview Report, produced by DataReportal in collaboration with We Are Social and Hootsuite, more than one in every ten working-age internet users now owns some form of cryptocurrency. This figure is larger in developing economies, particularly in nations whose traditional currencies are more vulnerable to exchange rate changes.
Cryptocurrency is gaining such steam in developing countries that some are announcing plans to declare cryptocurrencies like Bitcoin an official currency. These are often the countries whose economies rely largely on the remittance sector. El Salvador, for example, enacted legislation in June 2021 to recognise Bitcoin as legal cash in the country, giving it the same status as the US Dollar, which had previously been the sole currency used. The country’s economy is primarily reliant on the remittance market, which accounts for more than 20% of GDP, with 95% of remittances coming from Salvadorans working in the United States and going to their families in El Salvador. These remittances are critical to El Salvador’s and many other poor countries’ economic health, and cryptocurrencies are becoming a popular way of payment in the remittance industry.
In more stable economies, cryptocurrencies are frequently viewed with scepticism, with many not trusting digital currency administration and considering the currencies as having a strong reputation for usage. These concerns are exacerbated by regulators in the United States and Europe issuing cautions about trading cryptocurrency, increasing its untrustworthy reputation. However, in developing nations with a history of financial insecurity and limited access to established financial tools, cryptocurrencies are becoming the norm.
The growing popularity of cryptocurrency in developing countries can be linked to the unique prospects it provides for increasing people’s economic independence around the world.
What is financial inclusion
Financial inclusion entails providing everyone, particularly those who are underprivileged or marginalised, with access to a wide range of financial services, products, and resources. The goal is to offer people with the resources and opportunities they need to actively participate in the economy, manage their finances, and improve their general well-being.
Meanwhile, access to basic banking services (savings accounts, payment services, and credit facilities), insurance, investment possibilities, and other financial tools are all part of financial inclusion. It also entails delivering inexpensive and relevant financial services that fulfil consumers’ different needs, regardless of their economic level, geography, gender, age, or social standing.
Promoting financial inclusion strives to address economic injustices, reduce poverty, enhance lives, and empower individuals and communities to achieve a more secure financial future. Furthermore, financially inclusive regimes promote economic growth, stability, and resilience by boosting prospects for entrepreneurship, job creation, and asset accumulation.According to World Bank figures, around 1.4 billion individuals worldwide are unbanked.
How Cryptocurrency is driving financial inclusion and economic empowerment
The following are ways cryptocurrency is driving financial inclusion and economic empowerment, they are as follows;
1.Increased accessibility: Crypto-friendly banks are available online and may be accessed from anywhere with an internet connection. They provide customers with better convenience and speedier access to services than traditional banks, making them appealing solutions for those who reside in remote or rural locations.
2.Credit access and alternative lending: Crypto-friendly banks can provide access to alternative credit products and services tailored for underbanked people. These products frequently look at criteria other than a person’s typical financial history and allow those with poor or no credit histories to qualify for loans.
3.Financial literacy and education: Crypto-friendly institutions can provide financial literacy and education to help consumers better grasp the risks connected with trading cryptocurrency. Customers may be able to make more educated decisions about investing and managing their finances as a result of this.
4.Global accessibility and remittances: Crypto-friendly banks can enable consumers to easily send and receive payments across borders, which is critical for people who have family members living overseas. This accessibility from payment innovation bridges the gap between traditional financial and digital assets while promoting smoother remittance services globally.
In conclusion, Cryptocurrencies are becoming increasingly popular in underdeveloped nations where the local currency is facing hyperinflation, corruption is rampant, and there is a long history of financial hardship. Traditionally, these challenges develop as a result of the banking system, and cryptocurrencies are frequently considered as an alternative that can assist in overcoming them.
As a result of old financial systems, developing countries have suffered decades of restrictive banking laws and decaying infrastructure, with unpredictable inflation and volatile exchange rates continually undermining the value of their fiat currency. As a result, cryptocurrencies have become a viable alternative to weak national currencies.