From an obscure footnote known only to the most tech-savvy on a much more isolated Internet, bitcoin has transformed into a major player in today's financial landscape.
However, while we are all well aware of the impact of btc on financial markets (a more or less permanent fixture of the news cycle), we often forget to take a step back and look at how this new frontier affects real change already. the real people.
For crypto-adoption-in-black-communities/”>those historically marginalized by traditional banking Due to barriers such as bad credit or lack of accessibility, btc has become a vital financial tool. Its impact is most profound in developing countries, where access to banking still represents a challenge for many.
Here, bitcoin serves as more than just a currency or an investment; It is a means to engage in essential financial activities, such as sending and receiving money, that would otherwise be out of our reach.
Forget, at least for a minute, about the speculative potential in terms of financial gains: bitcoin's true value lies in its potential to level the financial playing field, offering access to financial tools that were previously exclusive to those with more established economic backgrounds. .
Amid its fluctuating value, bitcoin's enduring promise is its contribution to financial inclusion, making it a ray of hope for more equitable access to financial services around the world.
Historical context of bitcoin and financial inclusion
bitcoin was born out of the financial turmoil of the late 2000s, and its creators aimed to forge a decentralized currency that could bypass traditional banking systems and help society at large navigate a repeat of the 2008 financial crisis.
This vision was not only technical but deeply ideological and sought to empower people with financial autonomy.
In its center, crypto-make-good-on-its-financial-inclusion-promise/”>bitcoin promised to make financial services accessible to anyone with Internet access, regardless of their position with conventional financial institutions.
This promise has become tangible in countries like Nigeria, where traditional banking services are out of reach for many. In Nigeria, bitcoin has become more than a speculative asset—for example, given the country's significant diaspora, bitcoin facilitates remittances, allowing Nigerians living abroad to send money home more efficiently and at lower costs compared to traditional banking services.
In Argentina, bitcoin has become a crucial financial tool amid the country's current economic challenges, including high inflation rates and currency devaluation. For Argentines, bitcoin offers a more stable store of value compared to the national currency, the Argentine peso. which has suffered a significant depreciation Through the years.
A similar trend can be seen in Ghana, where the annual inflation rate is It is expected to land in the 13% to 17% range. in 2024.
In Venezuela, a country struggling with political instability and economic crises, bitcoin has found a unique role beyond simply a means to preserve wealth against hyperinflation. Here, bitcoin is being used to crypto-is-really-used-in-venezuela/”>Support microfinance initiatives and charitable donations., directly impacting the lives of those who need it. Organizations and platforms that leverage cryptocurrencies can bypass traditional financial systems, which are often inaccessible or unreliable to the country's impoverished populations, to provide direct financial assistance.
Additionally, for entrepreneurs and small business owners around the world, it offers a means to conduct international transactions without the need for bank accounts or the risk of currency devaluation. It is both a protection against crises and a vessel of freedom against authoritarian regimes, but the trick of decentralization is not.
The rise of bitcoin ETFs and institutional interest
By allowing investors to gain exposure to bitcoin price movements without the complexities of directly purchasing, storing and managing the digital currency, btc ETFs offer a familiar and regulated avenue for institutional investors to enter the bitcoin space.
Previously, the volatile and unregulated nature of bitcoin deterred many institutional investors. However, with the advent of ETFs and other regulated investment products, these entities technology/institutional-investors-may-help-bitcoin-sustain-new-heights-2024-03-05/”>now you can participate in the cryptocurrency marketbringing with it significant capital inflows and greater legitimacy and stability for bitcoin and the broader crypto market, which will only increase with greater adoption.
This institutional foray into bitcoin has a double impact.
On the one hand, it introduces a level of stability and liquidity never seen before, potentially making bitcoin a more attractive asset for both retail and institutional investors.
On the other hand, it represents a change from the original spirit of decentralization and democratization of bitcoin finance.
Another point to consider is that institutional interest is not limited to private for-profit companies; Countries like El Salvador, which recently took custody of its national bitcoin treasury, demonstrate that, slowly but surely, the general attitude of governments towards cryptocurrencies is also changing with the times.
Potential impacts of institutionalization on accessibility
On the one hand, these developments may improve bitcoin's appeal by contributing to market stability and reducing volatility, a key concern that has deterred a broader demographic from adopting cryptocurrencies.
The entry of institutional investors can also increase liquidity in the bitcoin market, potentially making it a more reliable asset for individuals and companies around the world.
However, the flip side of institutionalization is the potential increase in barriers to entry for marginalized groups.
The very essence of bitcoin's appeal to these groups bitcoin-improves-financial-access-and-inclusion-2021-06-21″>is its accessibility– The ability to participate in the financial system with nothing more than a smartphone and an Internet connection. As regulatory frameworks become stricter and the market becomes more institutionalized, the processes for acquiring and using bitcoin could become more complex.
Requirements such as rigorous identity verification and compliance with financial regulations, while necessary for fraud prevention and financial security, could inadvertently leave out those without formal identification or those who live in regions with less regulatory clarity. .
Besides, The shift towards institutionalization could lead to a concentration of wealth and power within the bitcoin ecosystem, reminiscent of traditional financial systems.
This concentration could undermine bitcoin's decentralized spirit, making it less about empowering the individual and more about serving institutional interests.
The challenge lies in finding a balance: harnessing institutional interest to bring stability and legitimacy to bitcoin while ensuring that its revolutionary promise of financial inclusion remains intact.
Financial inclusion and cryptocurrency adoption
Sub-Saharan Africa, with its combination of limited banking infrastructure and high mobile penetration, has become fertile ground for cryptocurrency adoption. The region, marked by its smaller overall market size in terms of traditional financial metrics, shows a significantly high level of cryptocurrency usage locally.
Nigeria, for example, not only occupies second place in the ranking crypto-adoption-index/”>Global cryptocurrency adoption rate but it also leads sub-Saharan Africa in gross transaction volume, as well as the world in P2P exchange trading volume ranking. Other countries such as Kenya, Ghana and South Africa also rank high in the index, underscoring the widespread acceptance of cryptocurrencies as viable financial instruments.
Adoption is largely driven by practical needs rather than speculative interests, with cryptocurrencies serving as a hedge against inflation and currency devaluation.
In Ghana, where Inflation rose to its highest level in two decades. By the end of 2022, and in other nations such as Nigeria, Kenya and South Africa facing similar economic challenges, cryptocurrencies have become an attractive means of preserving wealth. The shift toward digital currencies, particularly bitcoin and, more recently, stablecoins, reflects a broader quest for financial stability and freedom.
Peer-to-peer transactions, especially prominent in sub-Saharan Africa, represent a significant portion of crypto transactions, underscoring the region's unique position in the global crypto landscape. This high rate of P2P transactions is attributed to the daily use of cryptocurrencies for retail payments, remittances, and business transactions.
The preference for cryptocurrencies over traditional banking and financial services is not just a matter of convenience but a necessity in regions where local currencies are losing value, as seen in countries like Nigeria and Kenya.
By overcoming traditional financial barriers, cryptocurrencies offer expanded financial options to underserved markets, exemplified by initiatives such as Empowa and Fix it up in Mozambique and Kenya using blockchain to facilitate real estate development and connect MSMEs with global lenders.
Balancing institutional interest and financial inclusion
As bitcoin continues to navigate the waters between grassroots empowerment and institutional adoption, its future outlook presents a dichotomy.
On the one hand, greater institutional interest brings stability and credibility, which could make bitcoin a more viable and reliable financial asset globally.
On the other hand, this change could challenge the very inclusivity that has been the cornerstone of bitcoin's appeal, particularly among minority groups and in regions with limited access to traditional banking services.
To ensure that bitcoin-advocate-najah-roberts-explains-why-btc-is-a-tool-for-empowerment”>bitcoin remains a tool of empowerment, a balanced approach is necessary. One potential path is the development of regulatory frameworks that encourage inclusion.
Regulations could be designed to protect consumers crypto-regulation-shouldnt-kill-innovation-but-it-is-needed/”>without stifling innovation or access to cryptocurrencies. Additionally, continued support and promotion of peer-to-peer platforms can empower people by facilitating direct transactions without the need for traditional financial intermediaries.
Conclusion
As bitcoin evolves amid growing institutional interest, its critical role as an agent of financial inclusion faces challenges and opportunities. Ensuring that bitcoin continues to serve marginalized communities requires a delicate balance, combining the stability brought by institutional participation with its potential as a democratizing force.
One thing is certain: bitcoin's future largely depends on maintaining its essence as a lifeline for financial empowerment around the world.
This is a guest post by Kiara Taylor. The opinions expressed are entirely their own and do not necessarily reflect those of btc Inc or bitcoin Magazine.
