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Yes, Crypto is cool. But how about starting with more user-friendly tools?


Meveryone thinks that crypto will increase access to financial services for underbanked communities.

These crypto proponents say the abundance of mobile devices will allow people to skip the banks altogether and use crypto instead. More than five billion people around the world – almost 70% – currently own a mobile phone, according to the international mobile technology trade organization GSMA, and a large proportion come from underserved areas with little or no access to mobile phones. banking services.

Crypto believers say that crypto, especially some of the latest Web 3 innovations, offers hope to the underbanked, and that serving the underbanked is where crypto can be most helpful. They add that the lazy service of traditional financial institutions cannot compete with cryptocurrency technology.

But new crypto technologies are a long way from helping underserved communities escape their financial isolation. Companies behind crypto, including but not limited to decentralized finance (DeFi), have failed to deliver user-friendly apps, educational resources, and other tools.

The tools themselves are often difficult to use. As a result, bitcoin (BTC) and other cryptos have yet to make substantial inroads as usable currencies. Bitcoin’s volatility is also daunting. How can people trust an asset whose price seems to rise and fall with the winds?

Indeed, even as public awareness of crypto mushrooms increases and some of the world’s largest institutional investors launch their first projects to meet demand for the asset, crypto has yet to approach parity with the traditional currencies. Even in the United States, with its immense wealth and hubs of innovation, people rarely use crypto to pay rent, taxes, or other day-to-day expenses. Relatively few retailers accept it.

What can crypto provide if the controls are difficult to use and those who could use it don’t have enough willing partners to make the system work? We might as well give them fighter jets to fly.

Certainly, I remain convinced of the potential of cryptography. I see bitcoin, and possibly several altcoins becoming mainstream forms of exchange one day. I see blockchain technology as a way to improve centralized, entrenched systems in financial services and perhaps every other industry. I believe crypto can change lives because it meets the needs of every consumer.

Read more: A digital dollar may help the poor, but it’s far from a done deal

But I would like to suggest an alternative approach to crypto, an intermediate step while we wait for the right conditions for widespread adoption that makes more sense than trying to convert people who are not ready for conversion.

Financial services organizations and policymakers would do better to focus on expanding access to the services that underbanked people need to transact, even if those aren’t crypto-related. Underserved communities need help now, and the fact that this help is rooted in fiat currency and central banking systems should not hinder the process.

A volatile asset

Crypto is more of an investment class than a payment method or a new banking system. And while its trajectory has risen markedly over its short history, even with some massive dips, like the current six-month decline from a high near $70,000 in the fall of 2021, there’s no guarantee that it will retain its value from one day to the next. Such fluctuation is frightening for people struggling with survival issues, and perhaps accustomed to their own national currency losing value rapidly.

Such fear is especially relevant now. Even before Russia invaded Ukraine, inflation was skyrocketing. Think 8.5% inflation in the US is high, look at other countries.

Brazil, once a model of economic improvement, is now struggling with double-digit inflation. Nigeria, a business hub for sub-Saharan Africa, is struggling with levels of almost 16%, an improvement from much of 2021 (see below). And a number of developing countries are even higher.

Monthly inflation in Nigeria (TradingView)

Stablecoins?

Some crypto watchers believe that stablecoins may offer a better alternative to bitcoin because they are less volatile and look more familiar due to their ties to the US dollar. Crypto startup Reserve is even trying to get people in South Africa and other countries to use its stablecoin.

Read more: Can Bitcoin deliver on its promise to the unbanked around the world?

But stablecoins suffer from many of the same issues as BTC and other cryptos. They are difficult to understand and use. Few people accept them.

Next time you visit a cafe, ask the barista if they accept USDC or terra. They’ll think you’re from outer space and point to their Square console.

The Need for a Better Access Ramp

I don’t mean to sound discouraging. Crypto will one day be a widely available option for everyday transactions. Its logic and efficiency are too compelling to ignore. But we haven’t got there yet. We are at a transitional stage in the global economy with communities that once seemed like unpromising bystanders beginning to participate. But they need help now.

Instead of focusing on blockchain technologies which remain beyond their reach, albeit temptingly, they would be better served by gateways to centralized financial networks, especially the US monetary system which, at least for now , plays the central role in the financial markets. This is not to excuse the shortcomings of these systems.

We wouldn’t have blockchain technology and bitcoin if they were perfect. Protests by Canadian truckers underscored the vulnerability of centralized systems to state surveillance.

Inspired by the protests, David Heinemeier Hansson, the founder of the Ruby on Rails programming language and a hardcore technologist, recently wrote that he can see a future for cryptocurrencies in countries during times of turmoil. He noted that crypto could help individuals circumvent state surveillance that has increased over the past two years amid the global COVID-19 pandemic and other chaotic events around the world.

And we saw the power of crypto in the ability of Ukraine supporters to raise $100 million to fight against Russia’s unprovoked invasion. No traditional monetary system could have raised such an amount with the speed and efficiency of blockchain.

But people want a way to conduct their business right now. Even in underbanked areas, the most reasonable options still require a traditional financial service provider.

That will one day change as crypto continues to integrate more firmly into our daily lives. But simpler technological innovations offer greater and immediate relief to underserved populations.

Accessing simple things like a bank account through a phone would be a more impactful first step than skipping the basics and going straight into crypto. That doesn’t seem like much, but for now, that will have to suffice. The time for crypto will come soon enough.

Read more: How Crypto Can Power the Future of Work for People of Color

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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