Bitcoin as Currency for the Unbanked in Developing Economies

Although bitcoin has been gaining a lot of traction in major economies such as the US, Canada, and the United Kingdom, the cryptocurrency could still have tremendous potential for growth in developing economies. A huge part of the population among these nations are unbanked or without access to loans, credit cards, and other financial products, rendering bitcoin as a viable tool for fund transfer or investments.

Access to bitcoin is relatively easier these days, as several startups have created seamless ways to open a wallet and transfer funds. Bitcoin exchanges can allow people to make money off price fluctuations by buying or selling the cryptocurrency online.

Bitcoin for the Unbanked

In contrast, opening a traditional bank account or securing a loan can be quite tedious, as it typically requires some paperwork such as proof of identity or financial standing. Transactions on the bitcoin network bypass these requirements, as identities don’t need to be verified and the ownership and transfer is conducted by a series of computers solving complex algorithms in a process known as bitcoin mining.

In addition, the minimal transactions costs incurred in bitcoin transactions make it a cost-effective option for those seeking to make use of remittance services. Instead of having a large portion of the funds allocated to transactions fees, the bulk of the funds transferred through bitcoin is channeled to the receiver.

Developing economies are typically sensitive to the market behavior in major economies, such as that of China. Recall that the country suffered a massive stock selloff last month, triggering sharp declines in the equity markets in the region and spurring massive currency depreciation for some. This has eroded the purchasing power of many individuals in those nations, prompting some to find a store of value that is not on the decline.

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