Since the birth of a new financial revolution such as Bitcoin, certain obstacles have arisen in its path, ranging from environmental impact to political dissatisfaction. Various representatives of the political authorities in most countries opposed this evolution, but, nevertheless, it seems that the motivation for evolution is stronger than the failures on the way to its acceptance by society.
Let’s look at the growth and adoption of cryptocurrencies both in the world and in developing countries, as well as how it has affected the economy and livelihoods in developing countries.
If you look at the statistics on Coinmarketrate.com you will see that since 2009, when Bitcoin was created, the crypto space has grown: in size, struggle, acceptance and use cases. The popularity of this space went through the roof when the COVID-19 pandemic hit the global economy, because almost everyone found an alternative currency for investment. This mass appeal has led to an increase in the value of the space with the cryptocurrency flagship token at the heart of the movement.
In addition to the growth of market capitalization, the mass adoption of cryptocurrencies has led to the fact that people have turned to the global political space with an appeal to approve the cryptocurrency as a legal tender and official means of transactions. This is due to its wide possibilities of use, including the ability to cover the non-banking category of the population, as well as its diversification, which legal currencies do not have.
Despite the fact that the political force seems to be changing, there are still those who are categorically against the adoption of this asset class. In the USA, for example, there are several politicians, for example, Miami Mayor Francis Suarez, who declared the state a “Bitcoin city” and ordered him to be paid in Bitcoin along with other interested government employees. Other politicians also use cryptocurrency to finance their election campaigns.
At the peak of the spread of cryptocurrencies, the adoption of Bitcoin as a legal tender in El Salvador is in the political space, which is supported by the current president of the country, Nayib Bukele, a supporter of cryptocurrencies. Although this move has attracted huge criticism from individuals and institutions, the country does not seem to pay attention to them and promotes the adoption of cryptocurrencies by creating a government-owned data processing center for mining military-technical equipment powered by geothermal energy of volcanoes.
Bukele has personally been harshly criticized for using public funds to acquire Bitcoin, but in response he praised digital financial evolution for the engagement it gives to the non-banking population. He promised to use the proceeds from Bitcoin ownership to build infrastructure in the country, such as schools and veterinary hospitals.
The influx of institutional investors into the cryptocurrency space
In addition to the massive introduction of cryptocurrencies among individuals, institutional investors, who are often called “big money”, have shown interest in this space, which has caused approval from some skeptical people. Various companies have joined the crypto space, participating in financing, partnerships, mergers and acquisitions of startups, and even acquiring cryptocurrencies directly.
Like Tesla, the electric car company owned by billionaire Elon Musk, some companies have decided to accept cryptocurrencies as a way to pay for their goods and services. Among the companies accepting cryptocurrency as payment, one can name the Elektra store chain in Mexico, Amazon, Microsoft, PayPal, AT&T and other big names.
There are other companies that have cryptocurrencies on their balance sheet, for example, MicroStrategy, owned by the popular Michael Saylor, who has a positive attitude to the cryptocurrency space. At the moment, MicroStrategy is the company with the largest number of BTC on its balance sheet – about 110,000 Bitcoin.
Other companies that own cryptocurrency include Tesla, Galaxy Digital and Square, owned by the popular Jack Dorsey, former CEO of Twitter Inc.
The trust of institutional investors in the cryptocurrency space contributed to the further spread and growth of the value of cryptocurrencies and even prompted some large companies to participate in this area.
However, due to the massive spread of cryptocurrencies, it would not be superfluous to touch on the problems that this space has faced since its inception and even now. From 2009 to the present, there have been a number of scams and scams that have further strengthened the opinion of every opponent of cryptocurrencies in the debate. The most common of these are considered to be the use of cryptocurrencies to finance terrorism, money laundering and tax evasion, since the decentralized nature of the space through centralized exchanges is controlled by the government to prioritize KYC as a means of combating these failures.
Other types of fraud in this area are Ponzi, ICO (Initial Coin Offering) and other random scams, such as hacking wallets and exchanges.
Adoption of Cryptocurrencies in Developing Countries
Although it seems that the praises of cryptocurrencies are sung only in developed countries, the cryptocurrency space has taken root in developing countries no less than in developed countries, if not more.
The Global Cryptocurrency Adoption Index of 2021, published by Chainalysis, showed that countries such as Vietnam (which tops the chart), India, Pakistan, Ukraine, Kenya, Nigeria and Venezuela have higher index scores than the United States of America and some other key developed countries.
Due to the massive involvement in the financial life of the non-banking population, which is due to the digital revolution in the financial sector and can lead to a reduction in poverty in society, the cryptocurrency space has become famous in developing countries.
Firstly, working with cryptocurrencies does not require physical equipment or infrastructure, since everything you need is on the Internet, which eliminated the barrier associated with distance. Added to this is the growth of social trust, which seems to be lacking in the traditional banking sector, thanks to the ability to track funds in the crypto space.
Other problems associated with the involvement of people who are not covered by banking services in financial life, which arose with the advent of cryptocurrencies, include high bank fees, a mandatory minimum balance for opening an account, a large amount of documentation.
The World Bank believes that the lack of access to banking services may be the reason for the lack of media freedom in most countries. And cryptocurrency will be happy to solve these problems. In addition, it means that everyone can access financial services through cryptocurrency with fewer restrictions and barriers and, ultimately, without a central bank or issuer that sets clearing costs or other fees.
It may be difficult for cryptocurrencies to take root in developed countries due to the current financial system, but for the entire population of developing countries, it is an excellent addition, which was the reason for its widespread distribution in the region.
Despite the speculative and unstable nature of this space, financial instability in most developing countries has contributed to the successful formation and spread of cryptocurrencies. In addition, the inability of most of the population of developing countries to get access to some desired products in the traditional financial sector has caused the integration of cryptocurrencies into their daily lives.
How Cryptocurrencies Can Help Developing Countries
So far, the cryptocurrency has proven its usefulness in developing countries, at least thanks to the aforementioned facts. But there are still many contributions and improvements that the crypto space can bring to developing countries.
In this section, we will discuss how developing countries can benefit from the digital financial evolution, as well as how they can position themselves to take advantage of the avalanche of advantages inherent in this space.
As mentioned earlier, in most developed countries, the cryptocurrency space can be treated with great suspicion and skepticism, mainly because of the well-structured systems and environments available in these regions. But for developing countries, it may be necessary to deliberately position their proboscis to suck out the untouched nectar that comes with the development of cryptocurrencies.
Such a difference in structures and systems may lead to the fact that it would be unwise for most developing countries to adopt the approach of developed countries to cryptocurrencies. But it’s better to be open-minded and explore how evolution can improve their systems and create a better life for their citizens.
Below we will talk about how the evolution of cryptocurrencies can improve developing countries by increasing the level of financial accessibility for people who do not have access to banking services:
- Reducing transaction time and costs
One of the good things that has happened to the financial industry is cryptocurrencies, and that’s because they save money and time. Cryptocurrencies allow you to quickly conduct transactions even with cross-border payments with minimal costs.
Imagine a worker who aspires to work outside his country, most likely he has reasons to send money to his family or even to a private person in his country. But the cost of processing a transaction through traditional financial services can be very exorbitant, as well as the long time that will be required in cases of emergency financing.
Various companies operating in the cryptocurrency space have taken up the task of allowing employees (or even ordinary people) outside their home country (developing country) to send money home, while the recipient receives it in local currency. An example of such a company is Rebit, a cryptocurrency venture based in the Philippines that allows Filipinos to send money to the country while the recipient withdraws it in pesos.
In a country like Haiti, about 26 percent of the total gross domestic product (GDP), which is approximately $1.5 billion, is money sent home from citizens of the country working abroad. But, unfortunately, the fee for money transfers and processing takes from 8 to 10 percent, especially if the sender is from Canada, the Dominican Republic or the United States of America. In total, this costs about 150 million US dollars, which is an exorbitant amount, since the average person sending money home earns 500 US dollars a year.
This pain point has served as an incentive for cryptocurrency enterprises to release products that reduce the cost of processing transactions, as well as the processing time of a money transfer. Most companies have made their products available to users who do not have a personal bank account.
According to an article published on the Forbes website, these appetizing opportunities that appear with the development of cryptocurrencies have created a kind of competition between cryptocurrencies and banks. Firstly, working with cryptocurrency does not require the creation of huge physically unbroken accounts, not to mention the fees and commissions associated with banking operations. While some banking systems are already yielding to the new trends of cryptocurrencies, some are still in fierce opposition to this movement.
Promoting transparency and reducing corruption
Various studies conducted over a long time have linked poverty with corruption among leaders. An example of such research is a study conducted by Transparency International, one of the largest non-governmental organizations fighting corruption in the world. In their research, they found that there is a relationship between poverty rates and the percentage of those who give bribes among a certain population. They found that corruption alone would increase the United Nations budget by $48 billion to achieve the Millennium Development Goals.
One of the countries with a history of high corruption is Singapore, which, of course, is the reason for the high poverty index in the country. But thanks to massive anti-corruption campaigns, the country has become more stable, unemployment has decreased and, ultimately, poverty has been eradicated.
Thanks to the tracking of funds in the cryptocurrency space, anti-corruption organizations can now track how public funds are used or redirected, which will be very useful in the fight against corruption.
According to a report by the Brookings Institution, with the help of blockchain technology, a corruption investigation, which should take about 15 months, can be solved at the touch of a button. There is a possibility of reducing the misuse of public funds by $2 trillion per year, which is a positive assessment for financial evolution.
Opportunities to solve problems related to technology limitations
In truth, the growth of cryptocurrencies in developing countries will be limited, but the available technologies are very limited compared to technologies in developed countries. Since the cryptocurrency trend is one of the common basic trends in the world, immersion in the crypto space gives developing countries the right motivation to invest in the technologies necessary for successful prosperity and adaptation.
If we consider this on a smaller scale, then most of the population of developing countries does not have access to the Internet, which is necessary to use cryptocurrencies. One of the reasons for the growth of cryptocurrencies in developing countries is the increase in the availability of stable Internet for the population deprived of it.
An alternative for weak currencies and inflation hedging
As a result of a weak economy, the currencies of most developing countries are not to be reckoned with. And this is often the reason for the huge emigration from these countries. Cryptocurrencies, on the other hand, are called a store of value.
The evolution of cryptocurrencies has made it possible to take control of such financial and economic problems as high inflation, expensive and complex banking systems, rapidly changing (unstable) exchange rates, financial and regulatory restrictions and other threats to capital control.
Take Nigeria, for example, the most populous country in Africa. Uncertainty in the oil market, which is the country’s main export, has a huge impact on the dollar supply in the country and, in turn, affects other foreign operations, hence the abnormality that exists with currency exchange and the birth of what is called the “black market”.
With cryptocurrency, it becomes possible to forget about the worries associated with currency exchange, thanks to the possibility of conducting cross-border transactions and storing value, which saves money from depreciation.
Access to shared investment opportunities for all social classes
As a rule, in most developing countries there is a large inequality between social classes in almost everything, especially in access to financial investments. There are some social classes that don’t even have access to any investment opportunities, mainly because of the amount of money needed for investment. In some other cases, the documents necessary to interest them in the investment plan may be missing.
But with cryptocurrency, the market is not limited to any social classes, and this has significantly narrowed the gap that exists in social classes when it comes to financial investments, regardless of their volume.
Given all these facts about how cryptocurrencies can help developing countries, the leaders of these countries should become more open to exploring this seemingly unexplored trend in order to improve their existence, rather than following rigid structures.
Naib Bukele, president of El Salvador, responding to criticism, said that cryptocurrencies have done more than the traditional financial industry has done in a century, and he expects more developing countries to follow his example in their countries.