In the process of development in third-world countries, cryptocurrencies are considered essential instruments. Bitcoin specifically can positively impact developing countries in the area of business, finance, agriculture, etc.
For the sake of this article, I will define a developing country as one that has a low Human Development Index. Such countries lack infrastructural investments, low levels of industrialization, low per capita income, and low standards of living.
Developing Countries and the Problems They Face
Developing countries have a high number of unbanked people, usually due to the difficulties in getting an account and accessing funds in traditional banks. It is no coincidence that most of the countries in Latin America and Africa have largely found interest in digital assets.
Nigeria, for instance, has been said to be the center of crypto and the future of digital assets. However, some other countries are skeptical about the risk involved in cryptos which include tax evasion, terrorist financing, and money laundering. In this article, I will examine how cryptocurrency can positively impact the growing economy of developing countries.
Transparency and Accountability
One of the main problems of developing countries is the lack of transparency and accountability in the traditional banking and investment sectors. This often comes as a result of deep-rooted financial malpractices and corruption in developing countries. The efforts and policies of the government do “little to nothing” to salvage the situation.
Bitcoin can help solve this menace with the blockchain technology that records and stores data in a digitized public ledger. Blockchain has a unique block system of recording data that makes it impossible to be hacked, change, or cheat the system. A blockchain duplicates and distributes every transaction across the entire network. The technology can also go the farthest way to promote transparency and accountability.
Reduces Unbanked Adults
Cryptocurrencies are not restricted to specific groups of people, they can be traded anywhere around the world by anyone. The decentralized nature of cryptocurrency allows direct peer-to-peer transactions to take place securely and without the need for an intermediary. A decentralized market allows investors to deal with each other instead of operating from a centralized exchange. This can help boost investors’ confidence in investing in developing countries.
Apart from the above-mentioned point, Bitcoin, for instance, helps reduce the large number of unbanked adults in developing countries which has been a significant problem in the last few years. Cryptos offer a lot of conveniences that are lacking in the traditional banks and can win the trust of individuals as the world looks forward to a financial revolution.
Low Cost and Wide Support
Cryptocurrencies provide a low rate of charges on financial transactions compared to central banks. It helps transfer small amounts of money internationally, such as remittance payments. In fact, the cost associated with their transactions is quite minimal.
When it comes to starting a business, there is no time like the present. This is because blockchain technology and cryptocurrencies can help entrepreneurs to receive payments in numerous currencies. One such company that helps business owners in Africa make financial transactions with American, European, and Asian companies is BitPesa.
“The payment platform helps small to medium-scale enterprises to get better financial coverage and a financial liberation connection with the rest of the world. Using BitPesa and TenX’s digital wallet, entrepreneurs can exchange altcoins into fiat currencies quicker, then channel them to business investments, purchases, and payments.”
Inducts Smart Investment
A lot of people in developing countries are poor and are not able to access capital. Access to capital is difficult, and when readily available it can incur high interest rates in a short period. Bitcoin offers numerous opportunities for individuals and companies to acquire investment and access capital. It is a decentralized digital currency, which means anyone with a smart device like a mobile or tablet and the internet can access it.
Moreover, cryptocurrency supply cannot be influenced by the government or central bank. In developing countries, decisions and policies by the government have a tremendous effect on businesses and investments.
High Efficiency in Money transfers
Most developing nations still depend on statutory currencies issued by the central banks. The supply of such money is subject to government and political bureaucracies which is a significant problem. Money transfers and transactions are mostly very complex and inefficient. They are time-consuming and expensive as well. The government can even regulate the amount of money an individual or corporation can move out of the country to a foreign country.
There is a huge gap that leads to the uneven distribution of wealth, leaving most of the citizens in developing countries in abject poverty. As a digital financial instrument that is not regulated by any government or authority, Bitcoin allows users to trade anywhere around the world at their convenience. Since the currency is digitized, money transfers are always instantaneous. This helps to remove the lengthy money transfer procedures that most people face in developing economies.