Developing countries are having a multitude of issues in connection with their economic situations. Poverty, corruption, high inflation, and skyrocketing unemployment rates are plaguing the countries all across the world. This is even more apparent in the face of the novel coronavirus pandemic, which has hit these countries the hardest. While more developed Eastern and Western countries have money banked up and are able to stimulate the economy through government handouts as well as afford people staying home, countries in Africa, South America, as well as central Asia are struggling to keep afloat.
The danger is even more apparent in the face of the COVID-19 outbreaks getting out of hand as the healthcare system of developing countries cannot physically handle many infected people. Countries like Armenia are a good example of such incidents where, unfortunately, the government is struggling to keep the infected numbers in check.
With the accelerated pace of growth as well as technological advancements in more developed parts of the world cryptocurrencies are starting to be utilized in more than just trading. This means that all of the industries like entertainment and video games specifically, for example, have been jumping on the bandwagon. This makes it seem like the prospects of these countries seem bleak. Although, it is still important to note that the emergence of blockchain technology can give the long-desired pocket of air to the developing countries. This is due to the fact that their economies are much less set-in-stone in comparison to others. The regulations are either non-existent or still under development, which gives these countries the flexibility required to adjust to the newer systems and even adopt some of the best practices when it comes to blockchain and digital currencies. There are a multitude of ways cryptocurrencies can assist these countries and in this article, we will try to cover some of these aspects.
Lots of the developing countries are relying heavily on the transactions from the emigrants living in foreign countries. These are the people who work outside of their homeland and send money back to their families. For countries like the Republic of Georgia, for example, this constitutes around 14 million united states dollars per year. This is guaranteeing the livelihood for lots of families in the country as foreign currency value is much higher than the local one thus even the small remittance makes a big difference for poor families living outside of major cities. The remittance is done by utilizing services like Western Union, Money Gram, Uni Transfers, or just plain old international bank transactions. These services have their own fees involved which means a lot of people are “losing” much-needed money to the providers. According to the World Bank in 2016 alone the international remittance for developing countries accumulated to $441 billion, which is more than half of the total remittance globally. Sub-Saharan had the highest fees in comparison to the rest of the world with $20 for every $200 transaction.
The cryptocurrency is offering a different approach. Blockchain technology usually has drastically less remittance as well as the amount of hassle associated with the international money transfers. There are numerous platforms all across the world offering these services with the statistics showing the popularity in the African and Southeast Asian regions. There are Nigerian, Philippinian, etc. based blockchain-powered remittance systems that offer zero-cost, borderless transactions.
Financial inclusion is a huge issue all across the developing side of the world. Cash is the king in the countries like Myanmar. Even though the republic has been going through a lot of economic growth since 2012 as much as 70% of the population still does not have any bank accounts. All of the bills like electricity, groceries, house rents, and etc. are paid in cash. With the addition of the fact that 10,000 kyat (which is around $7.5) is the biggest note in the country, people have to walk around with huge bags of money to buy things that are even remotely expensive. Car dealer Myo min Min Htut of Yangon, which is a commercial capital of Myanmar, has stated in the interview that “If a customer wants to buy a new vehicle, he usually brings a stack of cash with him,” adding that “Customers often come to my showroom with bags full of money. We use machines to count the money.”
According to the World Bank, there are more than 2 billion people across the globe that have no bank account at all. It is no surprise that the majority of these people are living in developing countries like Myanmar, Pakistan, Chad, Burundi, Nigeria, Yemen, and Cameroon. The statistics show that less than 15% of the population in the aforementioned countries has a bank account.
Cryptocurrency services can help lots of unbanked people get some kind of financial instruments and services due to the fact that the only thing required is the internet. Blockchain technology makes sure that there is no need to go to a specific retailer or an office to make the transactions meaning that the implementation of these systems requires much less physical infrastructure than the traditional banking methods. There are even services offering crypto-backed loans to small and medium scale merchants. This makes it possible to jumpstart the import and export business which is a huge part of national commerce.
The increase in popularity means that governments have started working on regulating the cryptocurrencies everywhere. Even the developing countries like South Africa have made efforts to implement some kind of regulations on trading.
Access to the international payment systems is a huge problem for developing parts of the world as well. Many people in African countries have no way of converting money into internationally denominated currencies like the United States Dollars (USD) or Euros (EUR). This makes it impossible for merchants who have no access to the foreign currency exchange markets to trade with other companies from other countries.
Corruption is one of the leading problems in the developing countries. These are government officials or private individuals laundering or paying each other under the table for specific services. Since in a lot of these countries there are no money tracking instruments available or are in the hands of equally corrupted and biased government organizations things are becoming exponentially hard to counter or even detect. This makes accumulation of most of the funds in the hands of smaller percentage of people possible. It is term destroys the middle class and grows the financial inequality in the whole regions across the world.
In developing countries, the misappropriation of state funds by corrupt government officials has resulted in the nonadherence to the project contracting practices and creates an environment where cabals are able to send money in their own private pockets.
Cryptocurrencies offer a very interesting solution to this issue due to the simple fact that all of the transactions are fundamentally transparent, which means it is visible on the blockchain itself. This can be utilized during the elections as well since they are plagued with discrepancies that undermine the trust and reputation of the process itself. Cryptocurrencies and blockchain technology can be utilized to create an election process in developing countries where citizens are freely able to utilize their franchise.