What can cryptocurrencies ensure for economic development of third-world countries | The Financial Express

What can cryptocurrencies ensure for economic development of third-world countries

Market research has projected that potential crypto use cases such as remittances, microfinance, savings, identity verification, can help benefit third-world nations

Reportedly, Bitcoin legalisation enabled Ukrainian government to receive donations which complemented Western Aid
Reportedly, Bitcoin legalisation enabled Ukrainian government to receive donations which complemented Western Aid

Economic landscape around developing nations seems to suggest that decentralised finance (DeFi) can be an instrument for growth. From a financial purview, cryptocurrencies carry potential to ensure that developing economies get access to global monetary services.

According to United Nations Conference on Trade and Development (UNCTAD), an intergovernmental organisation, cryptocurrency ecosystem widened by 2,300% between September, 2019, and June, 2021, specifically in developing countries. Market estimates have shown that 2021’s digital currency ownership constituted 15 of the top 20 economies belonging from emerging markets and developing countries. “In my opinion, with the right infrastructure in place, digital assets could help developing economies by lowering transaction costs for both retail and institutions, increased efficiency in multi-party processes and could also lead to currency stability in countries by providing a hedge against currency inflation,” Karan Ambwani, India lead, dYdX Foundation, a decentralised platform, told FE Blockchain.

Market research has projected that potential crypto use cases such as remittances, microfinance, savings, identity verification, among others, can help benefit third-world nations. Insights from Medium, an online publishing platform, highlighted that cryptocurrencies such as Bitcoin can serve as a quasi-bank account. The cryptocurrency can help people from developing nations to ensure savings and conduct daily transactions. Furthermore, cryptocurrencies can help developing countries to avail loans quicker through reduction of transaction costs.

“In countries with high inflation or a weak economy, the local currency can lose value rapidly, making it difficult for people to save or plan for the future. Cryptocurrency, on the other hand, is based on blockchain and is decentralised, which can provide stability against political and economic instability,” Punit Agarwal, founder, KoinX, a cryptocurrency taxation platform, stated.

Reportedly, Bitcoin legalisation for Ukraine, El Salvador, Slovenia, among others, has enabled the entry of investors, developers, entrepreneurs, among others, in these countries. As reported by Center for Strategic and International Studies (CSIS), a think tank, Bitcoin legalisation provided Ukrainian citizens with a medium of exchange to cover war and humanitarian costs during Russia-Ukraine crisis. Also, the step enabled Ukrainian government to receive donations which complemented Western Aid.

Moreover, future predictions indicate that cryptocurrency in developing nations can help tackle corruption through a transparent structure. Although, the benefits are believed to be dependent on mass adoption of cryptocurrencies and compliance of all three functions of money. “It is likely that we might see more developing countries implementing regulations or laws to promote innovation and digitalisation. Developing countries, such as India, can use cryptocurrencies to combat corruption by providing transparency and immutability to financial transactions,”  Edul Patel, co-founder and CEO, Mudrex, a crypto-investing platform, mentioned.

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First published on: 13-01-2023 at 08:00 IST