Cryptocurrency adoption has accelerated globally in recent years. While Bitcoin initiated the revolution over a decade ago, today we have thousands of cryptocurrencies. Unlike in developed countries, where these digital assets are often seen as investment vehicles or get-rich-quick schemes, developing nations view them as tools to address real-world challenges such as financial exclusion, currency instability, and expensive remittances. This has made adoption in developing countries progress even faster.
In this article, HiRiBi invites you to look at some success stories and conduct a small case study of this phenomenon.
Why Crypto Finds Fertile Ground in Developing Economies
Several factors contribute to the growing popularity of cryptocurrencies in developing nations.
Unbanked Populations
Many people in these countries lack access to traditional banking systems. In some remote rural areas, physical bank branches are scarce or non-existent, making it difficult for people to open accounts or access financial services. Additionally, opening a traditional bank account typically requires formal identification and proof of income, which can be challenging for those working in informal sectors or lacking proper documentation.
Cryptocurrencies offer a solution to these challenges by providing an alternative financial system. Users can create a wallet on their phones, eliminating the need for physical bank branches. This makes their funds readily accessible, even in remote areas, as long as there is internet connectivity. Additionally, opening a cryptocurrency wallet requires minimal identification or verification compared to traditional bank accounts.
Volatile Local Currencies
Some developing countries face currency instability due to high inflation, which erodes the purchasing power of the local currency. This makes it difficult for people to save and plan for the future. Political instability and economic mismanagement further exacerbate these issues, causing fluctuations in exchange rates and devaluing local currencies compared to foreign ones.
In response, many citizens in these nations use cryptocurrencies as a hedge against economic challenges. Unlike fiat currencies, which governments can print at will, cryptocurrencies like Bitcoin have a pre-defined maximum supply. This scarcity theoretically limits inflation and provides a sense of stability. Additionally, cryptocurrencies operate on a global network, independent of any specific country’s economy, making them less susceptible to local economic fluctuations and political events.
High Remittance Costs
Millions of people from developing countries migrate for work opportunities, sending money back home to support their families. Traditional remittance services often charge high fees, eating into the hard-earned cash of these migrant workers. On the other hand, cryptocurrencies offer a faster and, in most cases, cheaper alternative for sending and receiving remittances.
Real-world Implementations and Impacts
Argentina’s Inflation-Driven Adoption
Forbes recently reported that Argentina has the highest crypto adoption rate in the Western Hemisphere. According to the report, Argentinians account for 2.5 million of the 130 million users on the top 55 crypto exchanges.
Interestingly, while global crypto investors often gravitate towards highly speculative assets like meme coins, Argentinians prefer stablecoins like USDT. The country has experienced high inflation, with a rate of 276% in the past year, and faces complex restrictions on accessing the dollar. Cryptocurrencies, especially stablecoins like USDT, provide Argentinians with exposure to the dollar and act as a hedge against their rapidly depreciating local currency. In the past, citizens have had to buy dollars through the black market at unfavourable rates.
Recently, Argentina elected Javier Milei, a pro-Bitcoin president, who has shown interest in dollarizing the country’s economy.
The Philippines’ Crypto-Powered Remittances
The Philippines is one of the world’s largest recipients of remittances. The country, which has over 10 million of its citizens working abroad, was ranked among the top five remittance recipients in 2023 by the World Bank Group, receiving $40 billion.
Traditional remittance services like MoneyGram and Western Union charge substantial fees, often exceeding 10% of the total amount sent. This eats into the hard-earned money sent back home by Overseas Filipino Workers. Additionally, traditional bank transfers can take several days to clear, delaying access to funds for families who rely on remittances for everyday expenses. This has necessitated alternative channels.
The Central Bank of the Philippines (BSP) has shown a progressive attitude towards crypto by recently approving a pilot program for the crypto platform Coins.ph to explore using a Philippine Peso-backed stablecoin for remittances.
Previously, Filipinos abroad had to use USD-backed stablecoins, incurring fees to convert them into pesos. However, with the peso-backed stablecoin, PHPC, these transaction costs will be eliminated. PHPC will also be available on other markets, allowing remittances to be sent from all over the world. Unlike traditional channels like banks, sending remittances via cryptocurrencies is cheaper and available 24 hours a day.
Nigeria’s Inflation and Unbanked Population
Nigeria is one of the most populous countries in Africa. One of the key factors driving accelerated crypto adoption in Nigeria is the country’s high inflation and currency devaluation. In June 2024, Nigeria’s inflation rate reached a 28-year high of 34.2%. Additionally, the Naira has been weakening against the dollar, standing at 1605 Naira per dollar at the time of writing. As the purchasing power of the Naira declines, Nigerians have increasingly turned to cryptocurrencies to store and grow their wealth.
A fraction of Nigerians, particularly those in rural areas, lack access to traditional banking services. KPMG reports that a third of the Nigerian population has low financial capability. Most of these individuals have no access to modern financial services like remittances, savings, and borrowing.
This situation has prompted the technologically savvy to turn to cryptocurrencies. These digital assets provide an avenue to participate in the digital economy, unlocking services like staking, remittances, and trading.
A Promising Future
The case studies and success stories above highlight the transformative potential of cryptocurrencies in developing countries. They offer an alternative financial system that is accessible, transparent, and potentially less susceptible to traditional economic pitfalls. As regulations evolve and infrastructure improves, we can expect crypto adoption to continue growing, fostering financial inclusion and empowering communities globally.
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