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Cryptocurrency adoption in developing countries
- Vrinda Mathur
- Oct 09, 2024
Cryptocurrencies—digital or virtual currencies secured by cryptography based on blockchain technology, such as Bitcoin and Ethereum—have had a profound impact on the global economic landscape. These novel transaction mechanisms have quickly gained traction in the financial sector, altering the dynamics of the global economy. However, there is still some skepticism about its widespread acceptance and adoption, owing primarily to misconceptions and a lack of sufficient guidance on how to utilize it.
Such gaps in understanding present an opportunity to resolve these challenges. Using the technological acceptance model (TAM), this study creates a concise model to explain the awareness, acceptance, and adoption of cryptocurrency.
Cryptocurrency’s Adoption in Developing Countries
Adopting cryptocurrency entails recognising it not only as a monetary asset, but also as the greatest risk-adjusted and liquid investment option. Furthermore, acceptance entails recognising cryptocurrencies as a useful system for value storage and transmission.
These days, when the entire world is experiencing a severe recession owing to a variety of factors, digital assets are here to assist us maintain wealth in the midst of increased fiat currency depreciation and hyperinflation.
While affluent countries have just recently experienced hyperinflation, underdeveloped countries have been dealing with it for decades. To combat what this unfair world has in store for them, inhabitants of underdeveloped countries have turned to cryptocurrencies as a lifeline to protect their purchasing power and store their assets.
Cryptocurrency adoption in developing countries has the potential to transcend established systems and drive economic progress. Despite ongoing hurdles, these countries see cryptocurrency as a method to overcome barriers, boost economic growth, and empower their citizens.
With the potential that cryptocurrencies provide, developing countries can influence the future of their financial systems and challenge the dominance of established currencies. Furthermore, the adoption of cryptocurrencies has the potential to diminish, if not eliminate, the corruption that is spreading in these nations as a result of bad financial conditions.
Also Read | The Ultimate Guide to Protecting Yourself Against Cryptocurrency Scams
Why Developing Economies Need crypto?
While established nations such as North America and East Asia continue to dominate the global cryptocurrency market, developing economies are catching up quickly. According to a 2023 research from Chainalysis, 40% of the world's cryptocurrency users reside in lower-middle-income countries (LMICs), reflecting the increased interest in these regions.
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Financial Inclusion
Traditional banking systems are frequently unavailable to substantial portions of the population in emerging economies due to a lack of adequate infrastructure or high minimum balance requirements. Cryptocurrencies provide an alternative by allowing people to participate in the digital economy without using traditional bank accounts.
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Technological Adoption
As smartphone penetration and internet connectivity rise in emerging economies, mobile-based crypto wallets and decentralized financial applications (DeFi) are more likely to be adopted.
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Remittances
Cryptocurrencies make it cheaper, faster, and more transparent for people to send and receive money across borders, which is especially important for migrant workers who send remittances home.
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Low transaction costs and faster transactions
Cryptocurrencies provide reduced transaction fees and speedier transactions, which might have a large economic impact on developing countries. Traditional banking institutions sometimes charge large fees for international transfers, making it difficult and costly for people in developing countries to send and receive funds across borders.
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Combating Weak National Currency and Corruption
Cryptocurrencies have the ability to solve problems such as weak national currencies and corruption in underdeveloped countries. In many developing countries, the local currency may be vulnerable to hyperinflation or manipulation by corrupt leaders. Individuals can use cryptocurrencies like Bitcoin to keep their wealth and conduct secure transactions without relying on unreliable national currencies.
Also Read | Types Of Digital Assets In Cryptocurrency
Impact of Crypto on Economic Development
Cryptocurrencies have the ability to alleviate poverty and increase financial inclusion in developing nations by offering access to banking services to those who do not have traditional bank accounts. Let's understand some of the major impact of it on the development
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Reducing Poverty and promoting financial inclusion
Cryptocurrencies have the ability to alleviate poverty and boost financial inclusion in underdeveloped countries. Many locations have limited or no access to traditional banking services, leaving millions of individuals without a secure and dependable way to save money or perform transactions. Cryptocurrencies, such as Bitcoin, can provide a lifeline to those who are barred from the official financial system. Individuals can use digital currencies to create and control their own accounts, eliminating the need for banks or intermediaries.
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Combating Inflation and Preserving Wealth
Developing countries frequently face the difficulty of hyperinflation, in which their national currencies rapidly lose value, reducing people's purchasing power and savings.
In such cases, cryptocurrencies such as Bitcoin provide an alternative store of value that is immune to government manipulation or depreciation. Individuals who possess cryptocurrencies can preserve their capital from the devastation caused by hyperinflation.
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Promoting Transparency and Reduced Corruption
Cryptocurrencies have the ability to increase transparency and eliminate corruption in underdeveloped countries. The decentralized nature of cryptocurrencies, such as Bitcoin, enables trustless transactions that are recorded on a public database known as the blockchain.This means that anybody can monitor transactions, making it harder for unscrupulous people or organizations to alter financial records.
Cryptocurrencies allow for safe and traceable payments, which can assist avoid bribery and embezzlement. Governments and organizations can use digital currencies to ensure efficient funding allocation and tracking of expenditures.
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Government Adoption and Regulation
As cryptocurrencies gain popularity in emerging countries, governments are beginning to consider their adoption and regulation. Many governments recognise the potential benefits of cryptocurrencies for their economies, such as enhanced financial inclusion and economic growth. There is also a need for regulatory frameworks to safeguard consumers, combat money laundering, and handle tax evasion concerns.
Final Words
Cryptocurrency growth in underdeveloped economies provides a unique chance to alleviate existing financial imbalances and give individuals more control over their resources. However, navigating this complicated world necessitates a cautious and thorough approach, with an emphasis on responsible development, user safety, and the establishment of a strong digital infrastructure. By overcoming obstacles and realising the potential of this innovative technology, we can create a future in which financial inclusion is a reality, economic development thrives, and individuals in developing economies are empowered to participate in a more equitable and inclusive global financial system.
Also Read | Top Cryptocurrency Exchanges in India in 2024
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