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Is cryptocurrency a catalyst for financial revolution or a Mirage for developing countries?
Can Bitcoin truly democratize finance and empower the underserved, or is it a digital illusion that could deepen existing economic disparities?
Cryptocurrencies are becoming increasingly popular as payment methods for online transactions. Photo Credit: Qonversations/Runway
Cryptocurrency has recently emerged as a speculative asset in industrialised economies, as well as a possible game changer in developing countries. Its decentralised character and promise of financial inclusion have generated both optimism and scepticism.
The arguments
While digital currency has shown potential as a vehicle for financial empowerment and economic prosperity in developing nations, considerable hurdles remain.
One of them is that digital currency’s price volatility poses a serious risk to users in underdeveloped countries, where financial stability is critical.
Another disadvantage is the ambiguity around regulatory issues. Many jurisdictions lack clear rules regarding cryptocurrencies, resulting in legal ambiguity and possible risks for consumers.
Again, infrastructure limitations such as poor internet connectivity and technological infrastructure in some areas impede widespread acceptance and use of crypto.
When it comes to energy usage, bitcoin mining, which demands a lot of energy, could exacerbate environmental problems in areas with unstable or carbon-intensive power sources.
The facts
Cryptocurrency provides people without bank accounts access to financial services, which are frequently unavailable through traditional banking infrastructure.
Cryptocurrency also facilitates cheaper and faster cross-border remittances than traditional methods, potentially saving billions of dollars in costs each year.
Digital currency provides an alternate store of value in areas afflicted by hyperinflation or volatile local currencies.
The World Bank Group’s focuses on improving SMEs’ access to credit and finding creative solutions to unlock capital sources. Virtual accounting systems thus give small enterprises the leverage to access global markets and accept payments without using traditional financial systems.
As the global conversation on cryptocurrencies continues, understanding these dynamics is essential for shaping policies and harnessing technology to foster inclusive economic development worldwide.
