Dear Bankless community:
Banks in emerging markets are also terrible.
The people of these countries are fighting rampant inflation, regulatory obstacles, slow payments and ridiculously high transaction costs.
If the people of a country cannot access basic financial services, how can they thrive?
Cryptocurrency is solving this problem.
It was slow at first… and then it was all right. And it has already started.
First, the network traffic of cryptocurrency platforms in Asia and Latin America is higher than in the United States and other Western countries.
why? Because cryptocurrency is becoming the best choice available.
This does not mean that every citizen will immediately open his own Ethereum address. I believe that most of the early stages of this kind of cryptocurrency fintech companies focused on specific groups of people and market niches.
They will bring more people into the industry.
Vance Spencer calls it a vertically integrated DeFi, and I expect it will become a major growth point for cryptocurrencies.
The author of today’s article happens to come from such a cryptocurrency financial technology company focused on Latin America.
Will cryptocurrency become a financial solution for emerging markets?
Read on to find out.
Financial solutions for emerging markets
Cryptocurrency fights inflation, red tape, slow payments, and high fees
In the United States and many other mature financial markets, crypto assets are viewed as speculative investments—revolutionary, frivolous, or false, depending on the source, but still profitable.
However, in emerging markets, cryptocurrencies are playing a more important role in daily financial transactions . Driven by concerns about the economic health of their countries, individuals and businesses in emerging markets in Latin America, Africa, and Southeast Asia are turning to Bitcoin , Ethereum, stablecoins, and a large number of other crypto assets.
In fact, according to Chainanalysis’s “2021 Global Cryptocurrency Adoption Index”, compared with larger economies such as Western Europe and East Asia, peer-to-peer (P2P) cryptocurrency platforms attract more emerging markets from Latin America, Central Asia, and South Asia. Personal network traffic. These people are using digital currency as a guarantee against inflation, as a low-cost alternative to cross-border payments , as an entry point for online financial transactions, and as a transparent method for conducting financial transactions.
The rise of cryptocurrencies in Latin America
In Latin America—Brazil, Chile, Colombia, Mexico, and Peru are experiencing a surge in inflation—a new middle class is emerging, with huge demand for consumer goods, services, housing, and mobility. In some markets, this emerging middle class often lacks the use of the traditional banking system and the funds for large-scale cross-border transactions.
This is where cryptocurrency comes into play.
Cryptocurrency provides a tool to hedge against inflation, is an alternative or supplement to traditional banking , and is also a cheaper method for individuals and businesses across the region to make cross-border payments.
In Mexico, Bitcoin has gained attention as an add-on to traditional financial services , providing a low-cost option for cross-border payments. Last year, migrant workers sent more than 40 billion U.S. dollars to their families in Mexico, of which 2.5-3% (1.2 billion U.S. dollars) were processed by Bitso, the country’s main cryptocurrency platform.
Of course, we also have El Salvador, which is the first country in the world to use Bitcoin as legal tender . The move to make Bitcoin legal tender was stimulated by the limited traditional financial services in El Salvador, where more than 70% of the population does not have a bank account. In a few small communities, Bitcoin has become the solution to unbanked accounts, and other parts of the country are following suit.
Now, as Chile enters an unpredictable presidential election, the economy is still recovering from the impact of COVID, and inflation has reached its highest level since 2016, and we can expect to see the role of cryptocurrency in Chile also grow.
At the end of 2020, Cuba also experienced severe inflation. At the same time, due to COVID and U.S. sanctions, financial review and access to foreign currencies were restricted. When Western Union stopped sending money to Cuba from the United States, Bitcoin provided a solution for many Cubans; through this model, Cubans can receive money from family members abroad and face severe inflation. Save their savings at the time.
Now, the Central Bank of Cuba is recognizing and regulating Bitcoin and other cryptocurrencies, and establishing new rules for how to deal with digital currencies.
Tools for Latin American SMEs
Cryptocurrencies have penetrated into peer-to-peer financial transactions in Latin America, and now is the time for companies to accept them.
Population growth has driven unprecedented investment demand for infrastructure, large companies have made profits, and small and medium-sized enterprises (SMBs) may find it a challenge to obtain the necessary financial instruments in a rapidly expanding economy.
These small and medium-sized enterprises in Latin America and other emerging markets often lack protective measures, cannot withstand the constant threat of inflation, cannot obtain funds to fund cross-border payments, and cannot obtain traditional banking services.
Once again…introducing cryptocurrency.
- Overcome inflation
In countries that are concerned about inflation, cryptocurrencies provide opportunities for small and medium-sized enterprises to store their funds as stablecoins—tokens whose value is linked to other currencies (such as the U.S. dollar or gold)—to help them avoid more traditional cryptocurrencies. Currency-related fluctuations, while avoiding local fiat currency inflation.
- Cross-border payment
These stablecoins provide additional functions for small and medium-sized enterprises that can use traditional banking services but lack the necessary funds to use payment tracks and cross-border payment fees.
By converting payments into stablecoins, SMEs can send money to anywhere in the world in minutes instead of days, without having to pay third-party fees or worry about inflation. This allows them to develop their business more efficiently than traditional payment tracks.
- Help people who cannot access banking services
Of course, there are still some small and medium-sized enterprises who do not have the opportunity to have access to traditional banks. With the invention of blockchain technology, SMEs can store their funds as cryptocurrency in a wallet. To create a wallet, a business only needs an internet connection and a connectable device.
There is no minimum deposit or cumbersome approval process, which means that cryptocurrency removes a large number of obstacles that have traditionally hindered SMEs from conducting virtual transactions.
- Get a loan
In addition to hedging inflation, providing cheaper and faster alternatives to traditional payment tracks, and helping unbanked people access banking services, the fourth and perhaps more innovative benefit is rapidly emerging in the cryptocurrency field. : Loans with insufficient collateral.
For SMEs with limited collateral and little access to the traditional banking system, obtaining loans can be troublesome, although necessary. Now, many cryptocurrency platforms participating in decentralized finance (DeFi) are working hard to create under-guaranteed loan products, which creates new ways for SMEs to obtain much-needed loans.
Start with small things: Fintech is just the beginning
Advising all SMEs in Latin America to adopt cryptocurrency immediately is a daunting task-basic technical knowledge (not to mention blockchain technology), Internet access, and customer needs may all become restrictive factors in adopting cryptocurrency.
Before more people can get started, we must use financial technology (FinTech) to slowly improve.
Fintech SMEs face many of the same challenges as other SMEs: inflation threatens their reserves . Their use of traditional bank accounts, loans and credit cards is often limited. Cross-border payments and other payment tracks are slow and expensive. In fact, compared to small and medium-sized enterprises that operate primarily in front of people, fintech companies—whose customers can be anywhere—are more likely to process slow and expensive international payments on a regular basis.
However, unlike more traditional SMEs, fintech SMEs already have basic technical knowledge and Internet access due to the nature of their companies; they even have an online consumer group, which means that online financial transactions are structured A natural part.
Ultimately, cryptocurrency can help all SMEs around the world solve the challenges of inflation, payment trajectories, and cross-border payments, especially in emerging markets such as Latin America, the Middle East, and Southeast Asia. Therefore, let us start with financial technology and then go to the world.
Fintech companies’ technical knowledge, Internet access and payment systems make it easy to transition to cryptocurrencies; let’s start with SMEs, who are mainly affected by inflation, expensive payment tracks and barriers to entry in traditional banking structures; let’s Starting in Latin America, fintech funding there has grown from US$44 million in 2013 to US$7.6 billion in 2021.
In the next few years, cryptocurrency can help small and medium enterprises everywhere to flourish.
At present, new cryptocurrency projects should look for opportunities to enter the Latin American market, and fintech SMEs should consider how cryptocurrencies can provide protection against inflation, create new ways for online transactions that are not affected by third-party banks, and provide traditional The payment track provides cheaper and faster alternatives, thereby completely changing the way they transact.
All parties have the opportunity to make money.
Original link: https://newsletter.banklesshq.com/p/the-world-needs-crypto
Ryan Sean Adams Author
Mike Jin Translation
Iris Dong edit
Author | Ryan Sean Adams
Guest writer : Mohamed Elkasstawi, co-founder and CSO of Tribal Credit
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/why-does-the-world-need-crypto-looking-at-cryptocurrencies-from-a-latin-american-perspective/
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