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A More Inclusive Financial System with Crypto

Financial inclusivity

December 10, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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Financial institutions drive the world economy. The countries with the full range of financial services tend to be the world superpowers. They have seamless financial institutions with all the systems in place.

Access to such services is impactful to development. They help in ensuring services like education, health, trade, and several.

Almost 94% of the developed world population have access to financial services. This is different from the developing world, where only 64% of the population has access. The same can be a factor in the low rate development.  

Some countries don't even have any operational financial system. They instead depend on the international reserve, the US dollar. An example is Mexico

The uncertainty and volatile Mexican currency mean they rely on USD. Access to the dollar is difficult for most of the population, which explains why they are one of the fastest countries embracing cryptos.

Cryptos are currently the best shot towards ensuring financial inclusivity. It is the face of the growing developing countries. 

These developing countries are home to a young, vibrant, and tech-savvy population. The population is taking advantage of the growing mobile and internet access. Access to electricity is also at one of the highest rates. 

Africa is the next crypto frontier; it will take advantage of the new financial system with crypto. The cryptos will make it a whole level playing ground for all countries. 

How cryptos Seek to Achieve Financial Inclusion

Satoshi Nakamoto released Bitcoin to solve the limitations of the traditional financial systems. It has so far worked to perfection. Financial inclusion is yet another situation the digital currencies look to alienate. The new financial system with crypto is the solution.

It looks to achieve the inclusive financial system through;

  • Lower transactions fees

The high cost of transaction fees has kept many people unbanked. They would instead use the money for accounts in other projects. Other third-party banking services are quite expensive and time-consuming.

Cross-border transfers have been worse in world economics. The foreign exchange rates don't favor both the senders and receivers.

The financial system with crypto eliminates conversion. Both the sender and recipient can agree to transact the same digital currency.

  • Ease of Account Opening 

Other than the cost of operating an account, opening one is such an issue. Most of the commercial banks need too many documents for one to open an account. This is understandable due to security measures. They put in place know-your-customer protocols and other regulations.

A significant population in the world don't have the necessary documents for opening bank accounts. Neither do they have any internet identity for the bank's needs. The cryptos change this by allowing ease of creating an account.

The decentralized nature of cryptos means there are no regulations when joining. One only needs access to the internet, and they are good to start. Some cryptocurrency projects like Humaniq make the process seamless. It only requires one's facial expressions to get biodata. The financial system with crypto also helps in ensuring security, like in traditional finances.  

The centralization of traditional currencies puts central banks as the control system. They make decisions on the supply and value. This means they can manipulate the value to drive a specific plan.

There has also been a concern about the use of commercial banks for illicit transactions. While most people have been suspecting cryptos for illegal use, it's the banks that are culpable. 

The financial system with crypto provides a reliable alternative. It does not need any single entity for market value. Instead, the value depends on market circumstances. It also has several crypto users to verify and confirm transactions.

Challenges in Cryptos Achieving Financial Inclusion

  • Regulations

Crypto regulation is one of the major concerns since the start. The government and other institutional investors have not taken lightly to the coin. They want digital currencies to operate like traditional finances.

The regulators want a secure crypto market for the traders. The market has been rife with scams and other concerns. 

The regulations have come in the form of bans and other stops. The issues have curtailed how much the cryptos could reach new markets. 

  • Scalability issues

The financial system with cryptos is not yet mass-adopted. The biggest challenge at this point is the low transaction speeds. Top digital currencies, like Bitcoin, can only afford ten transactions per second. This contrasts with the traditional speeds of around 1000 transactions per second.

Several virtual currency projects have always looked to solve the issue with no success. Bitcoin's first fork to create Bitcoin Cash was about improving the speeds. It was about increasing the block size to accommodate more transactions. It has not yet worked any magic. Instead, it's more forks coming up.

Other projects like Ethereum, Ripple, and Tether also don't solve the scalability issue. Only when it's solved will the crypto market become a formidable force. There are already different ways fronted to help make it right. 

  • Lack of Understanding of Crypto

Crypto is a new concept. Satoshi Nakamoto released Bitcoin a decade ago. That time is not enough to get a significant population into the new currency.

Most people don't get chances when it comes to money. The very same skepticism in the early crypto duration still exists. There is still more to let the population understand digital currencies. There is a need to understand the issues with the current financial system. They can then get the users to know how much cryptos solve them. Only then can the cryptocurrencies aid in the inclusive financial system. 

Bottom Line 

An inclusive financial system with crypto is what the world needs for unprecedented growth. Several countries struggle to access vital resources due to unbalanced finances.

Cryptos promise to right the wrong.

Digital currencies are making it easier for cross border transactions. They have also lowered transaction costs while building trust among users. Still, the new sector has time to help grow the culture of digital transactions. It also needs to solve the scalability issues and have the right regulations.

Either way, the future of currency is digital. Cryptos will become more vital as it looks for a more inclusive financial system. 

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