Crypto for Financial Inclusion

Crypto, through the blockchain, is driving the globe into more extensive utility and seemingly refined definition for money and finance beyond the limitations and borders of fiats. Finance is a broad word that got broader with several borders as humans from several walks of life made more discoveries over time. Governments and institutional policies of countries have entrenched a triangular view of finance (I.e. Fiat=Money=Finance) into human psychology. In a way, this has made defining ways for commerce, and international trading, thereby facilitating payments through the provision of several infrastructures and policies.

With several million people remaining unbanked globally, obvious barriers that the current traditional financial system imposes, and the evolutionary opportunities that crypto onboards, comes the possibility to eliminate financial restrictions and make financial inclusion a reality. This article aims to address how crypto is paving the way to making financial products and services accessible and affordable to all individuals and businesses.

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The Blockchain as a Leverage

Blockchain, as a revolutionary technology, exists as the launchpad for which crypto serves its full potential to individuals, traders, businesses, and even institutions. It is a distributed ledger technology that operates on nodal points of decentralisation, transparency, and smart contracts, which enables global accessibility – which is possible through peer-to-peer transactions without relying on a central authority. The immutability of blockchain records ensures that transactions cannot be altered or tampered with, enhancing trust in the system – thus onboarding folks from the traditional finance sector into crypto transactions.

As a technology that operates on a global scale, blockchain leverage eliminates geographical barriers and allows individuals from underserved regions to participate in the global financial system giving allowance for cross-border transactions, remittances, and access to financial services that were previously unavailable or prohibitively expensive. Through the blockchain, plus crypto, and tokenisation of real-world assets, new avenues are opened for individuals to invest in assets that were traditionally inaccessible, such as real estate, art, or other forms of investments. By leveraging blockchain technology, cryptocurrencies are enabling greater access, autonomy, and empowerment in the financial landscape, making it a powerful leverage for promoting crypto financial inclusion.

Multi-Faceted Utility of Crypto

The rising crypto use cases remain one important factor for crypto as a medium for financial inclusion. Decentralised applications (dApps), decentralised lending protocols, and non-fungible tokens, amongst other utilities, are servicing the need for microfinance, microtransactions, micropayments, arts, real estate, and diverse finance necessities at the tip of a user’s finger on their smartphone. This is providing alternative payment systems and financing options to those previously excluded from traditional systems while eliminating the need for intermediaries and reducing costs – thus making financial services more accessible and efficient. 

The multi-faceted use cases of cryptocurrencies enable financial inclusion by providing access to banking services, facilitating cross-border transactions, granting access to capital, offering alternative financial services, promoting financial sovereignty, enabling microtransactions, and driving financial education. Crypto is transforming the financial landscape by leveraging these use cases and creating opportunities for individuals who were previously underserved by traditional financial systems. This also fosters financial education and literacy as there is a spike in the crypto utility. 

CBDCs – Governmental Gateway to Global Adoption

The world’s government is already reclining to crypto after years of uncertainty. The gradual reality of digital currencies has taken hold in major countries in the world, leading to the birth of central bank digital currencies (CBDCs), which would not only institutionalise the global adoption of digital currencies (Crypto) but would also affirm crypto as the lasting resolve for financial inclusivity in all sectors. The CBDC’s existence would proffer a framework for regulatory oversight and consumer protection, which would establish rules and regulations around the use of CBDCs, ensuring compliance with anti-money laundering (AML) and know-your-customer (KYC) requirements. This regulatory framework can help mitigate risks associated with cryptocurrencies and enhance consumer confidence.

CBDCs would seek to integrate seamlessly with existing financial infrastructure, allowing for interoperability between traditional banking systems and digital currencies. This integration can simplify the adoption process and make the transition to CBDCs more accessible for individuals and businesses. This leverage would onboard the trust and influence of governments as CBDCs have the potential to bridge the gap between traditional financial systems and the crypto ecosystem. They can provide a regulated and secure entry point for individuals and businesses to explore and embrace cryptocurrencies, thereby promoting financial inclusion and driving global crypto adoption.

Frequently Asked Questions

How Can Cryptocurrencies Promote Financial Inclusion?

Crypto is a self-marketing financial tool that is gradually establishing itself as a potent medium for financial inclusion. It provides individuals with access to financial services, especially in regions with limited banking infrastructure. People can participate in the global economy, store value, send and receive funds, and access financial services without relying on traditional banking systems. 

Crypto revamps the whole finance scenery and customs. Unbanked individuals and marginalised folks in the traditional banking system can with their mobile devices and internet access, hold, transact, and store value seamlessly.

Are Cryptocurrencies a Viable Solution for the Unbanked Population?

Crypto could be of help to the unbanked as it would alleviate challenges such as a requirement to visit a traditional institution, time expended on KYCs, and restricted payments to local financial gateways. As much as crypto has the potential to address financial inclusion challenges, they are not a one-size-fits-all solution. Collaboration between various stakeholders, including governments, technology providers, and financial institutions, is necessary to create an ecosystem that supports the adoption of cryptocurrencies by the unbanked population. 

Digital literacy tops the list of necessities that must be met if the full potency of crypto as a viable solution for the unbanked would be a reality!

What Are the Risks of Using Crypto for Financial Inclusion?

Holding crypto itself is a risk, owing to the uncertainty in volatility exhibited by the price actions. There are also regulatory risks that also depend on a country’s stance or policy. Crypto also sometimes poses uncertainty and hosts a barrage of risks, including security vulnerabilities, lack of consumer protection, technological complexity, adoption barriers, and the prevalence of financial scams. Crypto awareness, caution, and education are essential to mitigate these risks effectively while effectively deepening its utility for total financial inclusion.