From the moment Bitcoin was launched back in 2009, people had a new way to make payments, where this cryptocurrency brought all digital assets into the spotlight, revolutionizing the payment system. In short, cryptocurrencies represent decentralized currencies not controlled by a government body, which are secured by cryptography and use blockchain to issue new coins and record all transactions. Currently, plenty of other digital coins are trying to solve the shortcomings present in this industry and develop unique specifications and features. Still, Bitcoin remains the largest digital coin by market cap and the preferred option for investors and crypto enthusiasts, as it has been in the game for the longest period, and people have started to figure out the best way to buy Bitcoin.
Although some believe cryptocurrencies are only for the affluent, this part is not true, as Bitcoin has brought many advantages to those living in developing countries. People think cryptocurrencies could help developing countries grow and create better conditions for their citizens. For example, cryptocurrencies might be helpful in isolated villages for those who don’t have access to other financial services. In this article, we will explore the integration of Bitcoin in developing countries and all the advantages that this measure could bring.
Why are digital currencies used in developing countries?
In recent years, developing countries have started to use digital currencies, mainly because of the benefits they bring to the remittance market. Not only this, but some countries have made Bitcoin a legal tender, and, from a closer look, these countries rely greatly on the remittance market. El Salvador became the first country to recognize Bitcoin as a legal tender in 2021, offering it the same status as the US Dollar, the main currency used then. A large proportion of El Salvador citizens work in the United States, and they need to send money back to their families.
Remittances are primordial in El Salvador, as they contribute to good economic health and offer better conditions. This is why El Salvador decided to integrate cryptocurrencies. Around the world, and specifically in stable environments, cryptocurrencies pose significant downsides, as they are volatile assets that have attracted an unreliable reputation. However, as developing countries have always dealt with difficulty using traditional financial tools and experienced financial instability, digital currencies have become the new norm, which could add many advantages to their situation.
Cryptocurrencies have become widely used in developing countries, as they present unique opportunities and can offer people more freedom. The benefits of cryptocurrencies include better accessibility, greater speed, lower transactions, and the ability to counter corruption and weak national currencies.
What are the benefits that cryptocurrencies bring to developing countries?
Improve the capital flow
Governments in developing countries have strict regulations that can restrict capital flow, whether within or outside the borders. This is why individuals living in these areas lack, most of the time, access to capital. However, by integrating digital coins, people will also benefit from decentralization, which prevents government bodies from restricting it.
Furthermore, governments can’t influence the value and supply of virtual coins, making them excellent solutions to inflation. Because Bitcoin’s underlying protocol determines its supply, governments are not able to control its flow, so people can access it from all around the world.
Fighting inflation
Developing countries are known for unstable digital coins, which pose issues for their citizens. This is why individuals have started to lose faith in fiat money and convert it into more stablecoins, like the Euro and the US dollar. Bitcoin is also a good option for people living in these regions, as it can be used as a hedge against inflation. This is another reason Bitcoin has become more utilized in countries like Argentina and Vietnam, as they have dealt with unstable currencies for longer.
Better accessibility
The use of cryptocurrency in developing countries has also happened because it offers a valuable tool to solve the lack of accessibility of traditional financial systems. As cryptocurrencies can be used by people worldwide, they provide better accessibility than conventional financial systems, which are limited. This is why cryptocurrencies can be a great solution to bank the unbanked population. Plus, the traditional financial options are not suitable for the citizens in developing countries, as they have high fees and lack a physical infrastructure, which doesn’t allow everyone to use them.
Low fees and processing times
Traditional financial systems involve considerable time and cost, which is why they pose problems to both the sender and the receiver. This is especially important in developing countries, as many families are dependent on the remittance market, and if they experience delays and high costs, they will face many problems. Cryptocurrencies have become a great alternative, allowing low-cost and quick international money transfers.
As digital coins function on decentralized platforms, they remove the need for middlemen, and international funds transfers are quicker than those with fiat money. In the traditional options, the payments can take days to complete, which is not something good to experience. Instead, transfers with cryptocurrencies can be completed in minutes, and individuals can make the payment almost instantly.
Counters corruption and weak national currencies
Developing countries deal with corruption and weak national currencies, a consequence of the government and financial system, so cryptocurrencies are seen as great options. In developing countries, the states have dealt with volatile exchange rates and unpredictable inflation, which have weakened the national currency’s value. But that doesn’t happen with cryptocurrencies, as they are not backed by governments, which brings a great advantage to the game.
Cryptocurrencies benefit countries both with prosperous and developing conditions, so they will surely be widely adopted in the future.
