The adoption of Cryptocurrencies is growing rapidly in developing countries. Rather than traditional financial resources, young people in Africa with only mobile phones are driving this development. Economic transformation is underway in emerging economies. As a result, cryptocurrencies are becoming part of everyday commerce in the developing world, while in other parts of the world they are often regarded as financial speculations.
In developing countries, this trend is driven by both small and medium-sized enterprises as well as by individuals. Taking the African continent as an example, it is impressive to see how developing countries can benefit from cryptocurrencies.
Cryptocurrencies driving new Economic changes
An accelerating flow of professionals and engineers is benefiting the developing world. People are attracted to the tech sector, seeking new ways to make their money and preserve their wealth. The principle of mobile payment services, for example, is already deeply embedded on the African continent.
Consequently, many African countries are well positioned to benefit from the adoption of cryptocurrencies. After all, the perspective on dealing with cryptocurrencies of people from third-world countries is inherently different from Westerners, who can enjoy easier access to banking.
The young generation are also interested in cryptocurrencies and the blockchain sector due to a shortage of job opportunities for school and college graduates. Given the new potential for economic freedom, it is also possible for young people to start their own businesses and launch them on the market. In addition, working across international borders is possible, as there is suddenly the opportunity to earn money across borders and thus build a significantly different standard of living than would have been possible for previous generations.
Prevention against Hyperinflation
Hyperinflation and the instability of emerging local currencies are likewise doing their part to persuade the younger generation in the developing world of the merits of cryptocurrencies. These offer a viable replacement for currencies that could fall into a bottomless pit or have experienced recurring negative impacts on trade and personal utility throughout time.
“Sure, Bitcoin Is More Volatile Than The Rate Of The US Dollar. However, The Opposite Is True For African Currencies. That’s Why Bitcoin Makes More Sense Here. It Is As If Cryptocurrencies Were Invented For Africa.”– Tawanda Kembo, founder of the African crypto exchange Golix
It is also highlighted by some blockchain experts that competing currencies, including digital currencies, can strengthen local money and give it a higher element of resistance.
In so many African countries, restrictions and controls on the circulation of financial assets mean that conventional banks are frequently unable to meet the needs of their respective customers. Many things are lacking: Transfers across borders are not possible, exchange rates are poor, and bank fees are often quite high. This negatively impacts business and economic growth in African and other third-world countries, while also demonstrating the transformative impact of digital currencies on the continent.
Support friends and family oversea
Regardless of where one lives or which geographical area one lives in, family members of a community also see the potential benefits of cryptocurrencies. For example, they may be used to maintain support for their family members in other countries or in their former home country.
Because the costs for remittances in emerging countries are often so high that they are hardly bearable for the normal consumer. This is where cryptocurrencies come in, as they make it possible to transfer money across borders almost free of charge.
Just to stick with the African example: Approximately $48 billion in remittances were remitted to sub-Saharan Africa in 2019 only, of which about 50% were to Nigeria. The Brookings Institute report shows that trade is large both within the African continent and between Africa, Europe, and the United States. However, between the continents there are of course not only remittances to Africa, but also a large volume of remittances. Particularly in the international trading business, cryptocurrencies are becoming increasingly popular. This means that cryptocurrencies can be used for the import and export of goods to and from the country, as well as for domestic payments.
Cryptocurrencies to fund children, foreign education.
However, due to local currency unstableness in many emerging markets, cryptocurrencies are providing a new momentum for financing education for generations to come. London-based Luno administered a survey to nearly 7,000 participants from Nigeria, Kenya, South Africa, the United Kingdom, Australia, Indonesia, and Malaysia to gauge the reasons that drove participants to explore digital assets. From the findings, most of the countries’ population are financially savvy and invest in meaningful and long-term objectives, with approximately 69% of them engaging in cryptocurrencies to provide a better life for their families.
When looking closer, 48% will invest their earnings in digital assets to pay for their children’s future education expenses. In the same way, 43% would do the same to create a fund to pass on to their relatives. Only 3% said they did not have a definite plan when making their investment decisions.
Marius Reitz – Luno’s General Manager for Africa – described this situation as a “crypto revolution,” adding that the opportunity that lies hidden in emerging markets has immense potential. However, a large portion of African natives lack basic awareness about cryptocurrencies, which is why they would choose not to invest in them, he said. 55% of Nigerians said they knew absolutely nothing about the investment class, while the percentages in South Africa and Kenya were 56% and 64%, respectively. This once again shows the potential that can be unleashed if more people in developing countries are exposed to digital assets.