In the Western world one common critique of Bitcoin and cryptocurrency in general is that “nobody uses it”. Skeptics are fond of arguing that crypto is entirely speculative and has minimal real world application. Even in the context of the developed world, this line of argument does not hold up very well when one takes into account the incredibly rapid proliferation of blockchain technology within just a few short years. When one looks beyond the myopic scope of the first world, the “nobody uses it” argument falls apart entirely.
Banking Access is Major Problem in the Developing World
Upwards of 2.5 billion adults lack access to even rudimentary banking services. As Foreign Affairs explained, “They can’t start savings accounts. They don’t have checking accounts. They can’t get credit cards. They live in places where banks don’t want to go, and because of this, they remain effectively walled off from the global economy.” While banking access remains an ongoing challenge, mobile phones have penetrated even some of the most remote areas of the developing world. Because cryptocurrencies allow anybody to store wealth using only a mobile phone, Bitcoin has given millions of the world’s unbanked citizens access to previously inaccessible financial services.
Instability Is Fuelling Bitcoin Adoption in the Developing World
Throughout the developing world, we have already seen a number of situations where citizens have turned to Bitcoin as a solution for international remittances, secure wealth storage, an alternative to hyperinflated national fiat currencies, and a gateway to the global economy. For example, in Venezuela, “Bitcoin has become the leading parallel currency. It provides millions of citizens with an opportunity to perform transactions and generate livelihoods, including buying food and other basic necessities in a country where official money is worth almost zero.” According to Bloomberg, the inflation rate in Venezuela as of December, 2017 was upwards of 500%. Despite Bitcoin’s volatility, it is far less vulnerable to that kind of hyperinflation, making it an attractive alternative as a store of value and means of exchange in many parts of the developing world.
In African countries such as Nigeria, Zimbabwe, and South Africa, cryptocurrencies are likewise becoming increasingly popular as an alternative to unstable national currencies, governmental corruption, and lack of access to traditional banking. Arnaud Masset, an analyst for Swissquote, told the Wall Street Journal, “Buying cryptocurrencies is seen as a protection by people who have been constantly disappointed by central banks and politics… When conventional money fails, bitcoin wins.”
Transfer and Remittance Fees
Prior to Bitcoin, the only real options for transferring money between borders and handling remittances were services like Western Union, Money Gram, and other third-party intermediaries. All of these services charge hefty fees. In 2017, according to figures released by World Bank, the average remittance fee for Sub-Saharan Africa was $20 per $200, the highest in the world. Globally, the same study recorded that remittances to the developing world totalled $441 billion dollars, more than 50% of all global remittances.
For the world’s roughly 258 million international migrants, remittance and currency exchange services have traditionally been the only option for many to send money back home to their families. High fees, long delays and confusing bureaucracy on one end eat away at funds that would otherwise go to relatives in need, while lack of access to banking, unstable national currencies, and government corruption often exacerbate the process of actually accessing those funds back home. It is perhaps not too surprising, then, that Bitcoin has rapidly become a popular alternative to the existing remittance system throughout the developing world, particularly those with large migrant populations working overseas.
In Africa, services like BitPesa and MPesa leverage cryptocurrency and mobile technology to bypass the legacy systems and create a cheaper, faster, and more accessible solution to remittances. Between July and September of 2016, more than $10 billion was transferred through MPesa, which already had over 20 million users in Kenya alone at the time. Similarly, for Filipinos, Rebit makes it easy to send money from anywhere in the world to the Philippines, with zero processing fees. Programs leveraging blockchain technology to reduce the cost of remittances are springing out throughout the developing world, providing even the unbanked with access to banking services directly through their mobile phones.
The Future of Crypto in the Developing World
With global mobile phone adoption projected to hit a rate of 67% by 2019 and the continued growth of international interest in Bitcoin and blockchain technology, it seems reasonable to conclude that there is more to come in terms of crypto usage throughout the developing world. Where the traditional financial system is inaccessible, broken, or corrupt, cryptocurrency can provide a more stable and secure alternative for individuals, allowing anyone to control their money and participate in the global economy using only a mobile phone. As the discourse surrounding crypto in the developed world tends to focus heavily on price movement and speculative investment, the developing world is diving into actually using cryptocurrencies as a viable alternative to traditional finance.