Economic growth is largely dependent upon the access to financial services. Unfortunately, there are still many barriers to banking, especially in developing nations – around 1.4 billion individuals worldwide can’t participate in the financial sector, limiting economic opportunities. Cryptocurrencies aim to change that by promoting financial inclusion through decentralization. They don’t rely on physical banking infrastructure, as users can store and transfer them digitally.
For instance, learning binance is a straightforward process – once you’ve set up your crypto exchange account, you can store your coins in your crypto wallet until you decide to trade it. However, while the price of Bitcoin is $28,072.90 today, it’s worth noting that it doesn’t stay the same – it keeps fluctuating, making it critical to always keep an eye on it.
Since the entire process of buying crypto happens online, everyone with a stable Internet connection and a computer can get started with cryptocurrency, boosting access to financial services without relying on a mediator.
Understanding financial inclusion: from the main barriers to its importance
Before diving into the role of crypto in financial inclusion, we should first clarify what this concept is about. Simply put, financial inclusion means making financial services and products accessible to everyone, whether companies or individuals. It’s about removing the barriers that prevent certain people from engaging in the financial sector. Extreme poverty is an example of such an impediment, as only a reduced number of households can access banking (1 in 5 in Africa, for example).
Broadening access to financial services means offering a tool that reduces vulnerability and improves the lives of the underprivileged. But extreme poverty isn’t the only thing that makes it difficult for individuals to access banking services. Financial institutions (for example, brokerage firms) require strict documentation for opening an account or transferring money, and those who lack it aren’t allowed to access financial services. Last but not least, low-income individuals don’t know how to use financial services or how to take advantage of them.
Individuals who can’t participate in the financial sector face crippling issues – they can’t receive certain payments, need to pay more for essential services like electricity, and are restricted from making purchases. In a world where e-commerce is only evolving, only those with a bank account and a credit card can order something online – which is unfortunately not the case for those lacking access to financial services.
Whether an individual or a business, financial inclusion can benefit everyone significantly, as it is a means of storing cash, managing payments, accessing credit, growing savings, and making investments. Moreover, it is also essential for acquiring assets and ensuring financial security. For businesses, financial inclusion translates into a better living standard in communities.
The rise of digital money and its role in advancing financial inclusion
Digital money, also known as cybercash or electronic currency, lacks physical attributes, as it is accessible only via mobile or computer. It has the same utility as a physical currency, as you can either pay for services or purchase goods. However, digital currencies provide an advantage over physical money: they enable instant transactions.
Different types of digital money are available, including CBDCs, stablecoins and cryptocurrencies, which have piqued the interest of many in recent years. Cryptocurrencies provide a range of financial services – for instance, they make cross-border payments seamless, making them appealing to migrant workers who want to send money to their family members.
Additionally, digital currencies increase accessibility to alternative financial services, like insurance, savings, and loans, without the need for a mediator, which helps reduce costs. But cryptocurrency’s mission goes beyond that. This revolutionary technology also improves financial transparency, reducing corruption through a decentralized ledger which boosts global trust in the financial systems. Smart contracts automate financial agreements execution, providing speed, efficiency and accuracy.
Blockchain technology – which powers cryptocurrencies – can be used to build decentralized financial applications like DeFi platforms. These platforms eliminate the need for a middleman, empowering individuals by giving them increased control over their assets. This is key to financial freedom – and it is invaluable for many.
Enabling access to financial services creates opportunities for individuals to learn how to manage their finances and invest safely – and it’s only through education they can achieve financial independence. While it’s true that cryptocurrencies have many perks, they can be pretty tricky to grasp, making digital literacy crucial for success. Individuals must learn how to manage digital currencies responsibly to make informed decisions and make the most of blockchain’s opportunities.
Keeping finances private is vital for many users if not most of them. And this makes a lot of sense – after all, who wants to openly discuss their financial matters, especially with strangers? Fortunately, cryptocurrencies ensure the anonymity and privacy of users because the transactions aren’t linked to personal information.
Through blockchain, users’ identity remains hidden through pseudonymous addresses – unique strings of characters that represent the identity of users. They are generated via a cryptographic process, and because they aren’t linked to someone’s real identity, the user’s activities remain private. This can be a significant benefit for those prioritizing confidentiality when completing transactions.
Looking towards a bright future
Cryptocurrencies and blockchain have been called disruptive many times before, although not everyone sees them that way. But despite what skeptics believe, one can’t overlook the impact digital currencies have had on the world, changing perceptions about money, as well as how businesses operate.
Cryptocurrencies offer solutions to the actual financial system, which is far from perfect, contributing to financial inclusion via cost-effective and accessible financial services. Blockchain has multiple use cases in financial inclusion, such as increasing access to banking, facilitating affordable remittances, creating secure digital identities, and enabling decentralized lending.
Although disruptive, this technology alone isn’t enough to solve the challenges associated with financial inclusion – other things are required, such as efforts among governments and organizations, private entities promoting digital literacy and financial education, as well as supportive regulatory frameworks. All these things, along with blockchain technology, can drive financial inclusion, resulting in sustainable development in underprivileged areas.
