In this article we explain how crypto projects can lead to financial Inclusion of the unbanked nations
Globally, even today, 1.7 billion adults remain Unbanked without access to necessary financial services. This data was given by the World Bank in 2017. Around 56% of Adults from countries like, Bangladesh, Pakistan, China, India, Mexico, Nigeria lack financial access which then disproportionately affects the development of these nations. Contributing factors like poverty, inadequate infrastructure, lack of financial literacy and stringent norms all coerce the adults to resort to informal services with often are unreliable, risky and expensive.
Cryptocurrency projects like Bitcoin, Ethereum holds a humongous potential to address the challenges faced by the unbanked population in the following ways:
- Reduced costs and quicker transactions: In traditional finance international remittance has an exorbitant charges. Cryptocurrencies eliminates the need for intermediary enabling peer to peer transactions providing cheaper and faster transaction.
- Using Mobile phones as a medium for Financial Inclusion: Around 5.27 billion mobile subscribers were present in 2021. The number have significantly increased in 2023 as well. Crypto wallets in mobile phones have made financial services to be more accessible enabling them to transfer store and receive digital currency securely. Defi platforms too provide an array of financial services such as loans, savings and insurance without the orthodox banking systems.
- Improved Security and Privacy: Transactions offered by cryptocurrencies occur on a decentralised and tamperproof ledger which provides them with transparency security and privacy. Such a technology will not only protect the bankers assets from theft and corruption but also from financial manipulation.
Cryptocurrencies are equipped with the potential to drastically improve financial inclusion through providing unbanked individuals access to essential financial services, such as remittances, savings, and loans. Such services are extremely valuable in countries with poor banking infrastructure or rigid regulations. Also the decentralized nature of cryptocurrencies enables low-cost, secure, and rapid cross-border transactions, and the transparent and tamper-proof nature of blockchain technology can help in building trust and security in financial transactions, ensuring that the unbanked individuals are well protected from theft, fraud, and corruption.
Just like everything this process can also come with its own cons. The primary one being the volatile nature of cryptocurrencies which could pose risks to unbanked individuals with limited financial safety nets. This issue can be partially resolved by introducing stablecoins. Secondary challenges might include the digital divide, as many unbanked populations may lack access to the internet or might lack digital literacy skills thus, hindering the adoption of cryptocurrencies and related technologies. And finally the uncertainty of regularity can impede the widespread use of cryptocurrencies unbanked nations. It is extremely important that policymakers consider the potential benefits and risks of cryptocurrencies while developing regulatory frameworks which will promote the financial inclusion of all while protecting the users from potential harm.
