In recent years, cryptocurrency has become increasingly part of the mainstream society, as businesses and individuals alike have acknowledged its vast potential. The launch of Bitcoin in 2008 brought cryptocurrency into the public consciousness for the first time. Nearly twenty years on, there are thousands of different cryptocurrencies available, although Bitcoin remains one of the most well-known as evidenced by current bitcoin news.
The use of cryptocurrency has tremendous benefits for businesses – from its immutability, which affords customers trust in a transparent supply chain, to the speed and efficiency of transactions completed without the use of intermediary parties. However, the advantages of cryptocurrency extend beyond the business world and can transform the lives of impoverished people, both in the western world and developing countries.
Improving the Lives of the Unbanked
In 2017, it was estimated that around 1.7 million adults did not have access to a bank account. As society becomes increasingly cashless and moves more towards a digital flow of money, the lack of a bank account can have far reaching consequences. Statistics show that the unbanked tend to be those on low incomes.
Without the ability to pay bills by direct debit, the unbanked typically miss out on lower rates and better deals. This translates to higher costs for energy bills, mobile phone bills, and insurance, which continue to exacerbate the issue of poverty.
The barriers to financial inclusion mean that these people can’t build up a good credit score, which feeds into a cycle. Without a bank account, they have poor credit scores, and without a good credit score, they cannot open a bank account.
The ability to send and receive money is only one aspect of the situation. The unbanked cannot access financial products and services such as loans, leaving them limited options to take advantage of financial support.
Cryptocurrency Gives the Unbanked an Opportunity
The advent of cryptocurrency changes the possibilities for the unbanked. While a bank account may be unattainable due to a low credit score, individuals only need a mobile phone or internet access to open a digital wallet and begin sending and receiving money. With local governments in developing countries and international organizations working together to improve internet access for all, the potential of cryptocurrency can truly be harnessed for the impoverished.
Those living in reasonable comfort often take the accessibility of bank loans and business investments for granted, but interest rates can act as a significant barrier for those on low incomes, leaving them unable to improve their prospects. However, cryptocurrencies can facilitate loans through the use of a Smart Contract, reducing fees and removing the intermediary. When considering taking out a loan, it is crucial to do adequate research into available money lenders.
For those living in developing countries, a bank account may be unattainable due to the transactional fees charged by banks and financial institutions. By contrast, sending cryptocurrency payments abroad eliminates the middleman and cuts down on fees. This allows those living overseas to send money home to family members.
Fighting Corruption
In developing countries, economic growth and stability is hampered by the inherent corruption plaguing local bureaucracy. Local communities and services cannot be improved without investment, leaving residents disadvantaged by poor healthcare, education and job prospects. Money earmarked for public services is often unaccounted for, misappropriated by corrupt officials.
The use of cryptocurrency can be a powerful tool against this corruption. Cryptocurrency is based on blockchain technology, where each transaction is recorded on a ledger and cannot be altered. Given the public nature of these ledgers, it is far more difficult for corruption to take place undetected.
A Stabilizing Effect on Inflation
A low level of inflation is not necessarily a bad thing, as it can stimulate spending and borrowing. However, hyperinflation can have a hugely detrimental impact on society. As the cost of goods and services rise, the devaluation of money can leave people unable to pay their bills and struggling to feed their families.
Inflation is a risk in every economy where banks can continue to print more money. Cryptocurrency behaves differently and acts as a deflationary tool, as companies typically cap the number of coins in circulation or limit numbers entirely. This ensures that supply never exceeds demand.
In unstable economies, using cryptocurrency can protect individuals against the negative consequences of high inflation.
What Needs to be Done to Encourage the Use of Cryptocurrency?
While businesses may be au fait with the use of cryptocurrency, individuals may feel confused and in need of guidance on where to start. Governments and local organizations should endeavour to support residents by running educational events and encouraging them to develop more confidence.
In contrast to traditional, fiat currencies, cryptocurrency can unlock a world which was inaccessible to those on low incomes in both the developed world and developing countries. The ability to send and receive money without incurring transactional fees, as well as accessing financial support during difficult times, can change lives and foster economic growth.