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By Mr. Edul Patel
Cryptocurrencies have been gaining much attention in recent years for their potential to transform the financial industry. These built-on blockchain technologies can record and verify transactions, making them secure and transparent at all times. While the use of cryptocurrencies has primarily been limited to developed countries, on the other hand, there is also a growing interest in exploring them to drive economic development in developing countries.
How can Cryptos drive the Economy?
Cryptos have the potential to drive economic growth by providing new opportunities as well as addressing existing challenges. Developing countries often face economic challenges, but the use of cryptocurrencies can accelerate economic development in various fields. With the widespread usage of the internet and smartphones in recent years, more people in these countries can access and use cryptocurrencies. Blockchain technology allows easier access to remittances, facilitates cross border trade, improves the supply chain in several segments of the economy.
Increases Financial Inclusion
One key area where cryptocurrencies could drive economic growth in developing countries is facilitating remittances. Imagine having to send money to a close relative studying abroad. The most common way of transferring money has been through banks, and that procedure involves a ton of paperwork, declarations and time. Moreover, it is usually a challenge to get the best forex transaction charges levied by the banks. With crypto, this entire process could literally be achieved in a couple of minutes.
They can promote financial inclusion by providing access to financial services to individuals and businesses that may not have been able to access them through traditional means. Migrants send money back to their home countries to support family members and local businesses.
Cryptocurrency can make it easier for individuals and businesses to access international markets by reducing the barriers to cross-border trade, including currency conversion costs and regulatory compliance. This could increase the amount of money flowing into developing countries, which could boost economic activity and support local businesses. This allows for easy global money transfers, eliminating the need for a bank account for participation in international trade. It can also help small-scale international trade to grow in these countries. It can be helpful when discussing developing countries with limited traditional banking infrastructure.
Additionally, they can also provide individuals and businesses with a way to store value and access credit, even if they cannot open traditional bank accounts. This is possible through digital wallets that can be accessed with a mobile phone, which would make it easier for people to access digital currencies and use them in transactions.
Cryptos have the potential to combat inflation by acting as a store of value, an alternative currency, and a decentralized platform. They can act as a store of value by being decentralized and not backed by any government, meaning the supply of coins is fixed, protecting the value of assets denominated in that crypto from inflation. They can act as an alternative currency used to transact in times of high inflation if individuals and businesses lose faith in fiat currency. Finally, the decentralized nature of the transactions removes the ability of central banks to ‘print money’ and increase the money supply, which can mitigate the impact of inflation.
Cryptocurrencies ensure better transparency and immutability in financial transactions than traditional currencies. This can help reduce the potential for corruption. With blockchain technology, cryptos can create a tamper-proof digital ledger of all transactions. It can increase trust and accountability in financial systems, making it more difficult for corrupt actors to hide or move illicit funds.
Overall, cryptos can create a considerable impact on the growth of developing countries by increasing financial inclusion.
Edul Patel is the CEO and Co-founder of Mudrex. He has over a decade of experience in finance, entrepreneurship, and building tech-driven applications. Edul graduated in 2011 from India's most prestigious school of engineering – IIT Bombay. As a student, he was not only passionate about his subjects but was equally zealous about all the extra-curricular activities. Linkedin
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.