Cryptocurrency was created with the goal of changing the financial market. In emerging economies, it is becoming a tool for financial inclusion for those who cannot rely on traditional banking mechanisms.
The World Bank reported roughly 1.4 billion people were unbanked, most residing in developing countries. How is crypto acting as an unexpected savior for these individuals in emerging markets?
Also Read: 2024 US Election Results: Impact on Crypto Markets
Discover how cryptocurrency is transforming banking in emerging economies.
It is a decentralized, borderless, and easily accessible alternative to modern banking. This empowers individuals to participate in financial matters without having a traditional bank account.
Addressing Financial Exclusion of Individuals
In many emerging economies, there are barriers that prevent citizens from creating a bank account. It can be due to lack of identification, bad credit history, and residing in remote areas.
Crypto overcomes these obstacles by allowing anyone with internet access to create a digital wallet. These wallets do not require much documentation unlike normal bank accounts. This makes financial services accessible for those that are financially excluded.
Decreasing Cost of Transactions
Millions of transactions occur every day that are critical towards sustaining a country’s economy. One of them is remittances sent by migrant workers (mostly from emerging economies) living outside of their home country (mostly developed economies).
Many lose out on hard-earned cash while sending money back home to their families through traditional remittances services. This is attributed to the high transaction fees charged by agencies.
Cryptocurrencies offer a cost-effective alternative where cross-border transactions are conducted almost instantaneously with minimal charges. The slightest amount of money saved influences the families of such laborers on a large scale.
Promoting Small and Midsized Enterprises Globally
SMEs contribute roughly 45% of GDP of emerging economies. These are key drivers of the local economy. Cryptocurrencies empower SMEs to partake in the global economy.
Local artists, freelancers, and other small businesses can display their products and services in decentralized marketplaces. This enables direct interaction with global clients, working around middlemen who would otherwise charge hefty fees.
Key Considerations for Emerging Economies
While cryptocurrency holds immense potential for emerging economies, there are certain challenges that hold back its incorporation. From lack of infrastructure readiness to low financial literacy, all obstacles must be addressed.
Closing Thoughts
Financial inclusion is a key future trend of the banking industry. Crypto helps convert that trend into reality, particularly in emerging markets. As it continues to evolve, the potential it has to drive economic empowerment in such economies will become distinct.
