Cryptocurrencies and blockchain technology have the potential to bring about significant changes in the financial industry, particularly when it comes to financial inclusion. Financial inclusion refers to the ability for individuals and businesses to access appropriate and affordable financial services, including banking, credit, and insurance.
Credit cards, Bank accounts & ATMs. These are simple tools that many of us take for granted. Even if we’re struggling financially, thanks to an elaborate system of banks, we often have the means to get by.
This is not the case in much of the world. The World Bank estimates that there are 1.7 billion people, or 31 percent of all adults, who are “unbanked,” and in some developing economies, it’s as high as 61 percent.
These 1.7 billion people that the traditional banking system has left behind—who are often already economically challenged—have little means to easily send and receive money, build up a savings account, gain access to credit, or secure insurance.
Here are 3 ways blockchain can lead to financial inclusion:
1. Crypto as a tool for remittances
A common crypto narrative revolves around its ability to help individuals—in particular, immigrants to end cross-border remittances abroad. The 1.7 billion people who are unbanked not only have a harder time sending and receiving money, but also often lack the means (such as a passport, proof of income, reliable Internet, and a smartphone) to open an account. Cryptocurrencies, and specifically stablecoins, offer a cheaper alternative to existing cross-border remittance systems by offering an option for peer-to-peer transactions, which cut out middlemen and fees.
2. Crypto as a wealth-building tool
Cryptocurrency can serve as a wealth creation tool in several ways. Firstly, the value of many cryptocurrencies has appreciated significantly since their inception, leading to significant gains for early investors. For example, Bitcoin, the first and most well-known cryptocurrency, had a value of less than one cent when it was first created in 2009, but has since risen to over $50,000 in 2021. This has led to many individuals who invested in Bitcoin early on becoming significantly wealthy as a result.
Additionally, many cryptocurrencies also have a finite supply, which can lead to scarcity and increased demand, driving up the value of the currency. Crypto can also be a tool for passive income generation through staking or lending. Lending platforms offer the opportunity for crypto holders to lend their assets to borrowers and earn interest on the loan.
3. Solving humanitarian issues through blockchain
Traditionally charitable organizations have functioned as an intermediary between people who are willing to donate essentials and those who typically live below the poverty line. Often times these donations go lost or unnoticed, as the donator isn’t aware of how his donations are being utilized. Philcoin aim’s to bring the world together through an ecosystem that changes how we donate. It is designed to support humanitarian and environmental crises around the world. It’s unique approach to philanthropy is developing a vibrant digital economy of giving. Philcoin’s purpose is to leverage blockchain to teach others how to GIVE and inspire UNITY in support of humanitarian endeavors.
The use of blockchain can provide the unbanked population with the ability to trade and hold their assets in a decentralized manner. Overall, the technical features of cryptocurrency, such as blockchain technology, smart contracts and mobile wallets, combined with decentralized exchanges, make it a powerful tool for financial inclusion of the unbanked population.