This emerging tech seems to have the potential to allow economic and social growth throughout the globe, including in developing countries and charities. Here’s how:
- Reducing Corruption by Promoting Transparency
There’s substantial research highlighting the link between poverty and corruption.
A study revealed that corruption can increase poverty and income inequality through lower economic growth, poor targeting of social programs, biased tax systems favoring the well-connected and rich, lower social spending, the use of wealth to lobby government for favorable policies that prolong inequality in asset ownership, and more.
Cryptocurrency can help developing countries and charity donations by delivering an innovative method of stopping corruption. Since cryptocurrencies and all blockchain transactions are digitized and automated, they’re all tracked in a distributed ledger, minimizing the risk of data loss.
What’s more is that cryptocurrency can’t be manipulated by either companies or people, which greatly reduces the risk of corruption and fraud. Crypto encryption also allows for greater data security while transaction trackability makes all transactions publicly searchable and available.
For most public blockchain, there’s no anonymous or ambiguous user. Because each and every transaction is traced, corruption can be prevented while boosting transparency.
This only means that underdeveloped countries have an increased chance of entering the financial transactions game, boosting their own social prospects and economy. The same benefits can be gained for charities, preventing the mishandling of donations and ensuring that all money will be delivered to the intended recipients. All they’ll need is to become educated on cryptocurrency transactions by obtaining a guide on how to buy bitcoin.
However, there are some blockchain networks that promote privacy, hence users can stay anonymous.
- Cutting Transaction Time and Costs
The power of crypto offers two critical assets to any individual in this modern world— money and time.
The global remittance system is based on the activities of citizens of developing countries who immigrated to the developed nations. From time to time, these foreign workers have to send money back home. To do so, they use intermediary services such as Money Gram or Western Union. Such platforms collect charges and fees which considerably increase the cost of such transactions.
The same happens to charities. When directly sending donations to charities, fees are often charged by debit or credit cards and Automated Clearing House (ACH) processors. If a 3rd party donation solution is used, there are still several fees involved including the fee charged by a disbursement company to send money to charities, fees charged by the payment processor, and fees from the donation solution that facilitated the transaction.
Money transfers can go from a few hours to days, depending on the payment processors and bank used.
With cryptocurrency, the cost of money remittances can be drastically reduced along with the hassle entailed in sending and receiving during international money transfer. Using a cryptocurrency like Bitcoin to directly send and receive money remittances and charity donations is instantaneous and cheap. Plus, it’s super easy!
- Greater Financial Inclusion
The lack of financial inclusion is a huge problem for most low-income countries. There are over two billion people in the world without a bank. The majority of this number lives in developing countries around the globe including, Yemen, Nigeria, Pakistan, and Burundi. Here, less than 15% of adults have bank accounts. Even the ones with bank accounts don’t have access to premium banking services. Such lack of access becomes a barrier from participating in global commerce.
Other barriers include a lack of physical infrastructure as well as high banking fees, particularly for mobile banking, which is sometimes the only choice for people far from physical banks.
Crypto can provide a way to remove these barriers. It’s a software-based solution that’s readily available via the Internet. This means that it doesn’t need physical infrastructure. Access to crypto comes in the form of a digital wallet that doesn’t require a bank account. People who are limited by not being able to access banking infrastructure can turn to crypto to meet their financial needs.
There’s also the added incentive to empower medium and small-scale businesses. With crypto, local merchants can start to think global in terms of exports and imports. Crypto platforms can offer crypto-backed loans to these merchants, which goes a long way in getting them started in the export and import business. Another way crypto can increase the financial inclusion of developing countries is by providing access to the international payment system. With global commerce mainly dominated by the US Dollar, specialized crypto platforms can provide a way to pay and receive in foreign currency.
As it continues to evolve, it’s interesting to see to what extent charities and developing countries apply cryptocurrency and blockchain solutions to their problems and improve their economic activities.