In developing countries, the adoption of cryptocurrencies is increasing at an exponential rate. Young people in Africa, who only have a smartphone rather than access traditional finance, are driving this development.
Developing countries are in the midst of an economic revolution. And the trend continues: while cryptocurrencies are often referred to as financial speculation in other parts of the world, there is a clear trend towards day trading in the third world. Small and medium-sized companies and individuals in third world countries are responsible for this trend. The example of the African continent impressively illustrates how developing countries can benefit from cryptocurrencies.
Cryptocurrencies are seen as ‘game changers’
Developing countries benefit from an ever-increasing number of professionals and entrepreneurs. Young people are attracted to technology and are looking for new ways to earn money and protect their wealth. On the African continent, for example, the principle of mobile payment services has already taken root. As such, many African countries are well positioned to benefit from cryptocurrency adoption. This is because the perspective of people from third world countries on dealing with cryptocurrencies is inherently different from that of Western populations, who have easy access to banking services.
Cryptocurrency specialist Elisha Osu-Akyaw explainedThe younger generation is also interested in cryptocurrency and the blockchain field due to the lack of opportunities for school and university graduates. New opportunities for financial freedom also allow young people to start their own businesses and bring them to market. In addition, an international way of working is possible, where suddenly there is the possibility of making money across borders and thus building a standard of living significantly different from what was possible for previous generations.
Avoid currency instability
Hyperinflation as well as unstable local currencies are playing their part in convincing the young generation in the Third World of the benefits of cryptocurrencies. These provide realistic alternatives to currencies that can frequently depreciate or have adverse effects on commerce and private use over time. Some blockchain experts have also highlighted that competing currencies, including in the form of cryptocurrencies, can strengthen local money and give it a higher level of resistance.
“Certainly, bitcoin is more volatile than the US dollar. However, the opposite is true for African currencies. That is why bitcoin makes more sense here. It is like cryptocurrency was invented for Africa.” – Tawanda KimpoFounder of the African cryptocurrency exchange Golix
In many African countries, there are controls and restrictions on the movement of capital, so that ordinary banks are often unable to fulfill the wishes of customers. Various things are lacking: cross-border transfers are not possible, exchange rates are very poor, and bank fees are usually very high. This has a negative impact on entrepreneurship and economic growth in Africa and other third world countries, while demonstrating the transformative impact of digital currencies on the continent.
Support of family members
Community members, regardless of where they live or the country, also see the benefits of cryptocurrencies. They can be used, among other things, to continue to support family members in other countries or in the former home country. Because the costs of remittances to developing countries are often too high for the average consumer to bear. This is where cryptocurrencies come in, making cross-border transfers possible for almost free.
To stay with the African example, in 2019 alone, nearly $48 billion in remittances went to sub-Saharan Africa, of which nearly 50% to Nigeria. The Brookings Institution report shows that trade is high within the African continent and between Africa, Europe and the United States. Of course, there are not only intercontinental transfers to Africa, but also a large volume of return transfers. Cryptocurrencies are becoming increasingly popular, especially in international trade. Thus cryptocurrencies can be used for importing and exporting goods abroad and domestically as well as for domestic payments.
Crypto to fund children’s education
Given the instability of the local currency in many developing countries, cryptocurrencies are giving a new impetus to financing the education of future generations. London-based company Luno operated Survey with approximately 7,000 participants from Nigeria, Kenya, South Africa, the United Kingdom, Australia, Indonesia and Malaysia to identify the reasons why participants engage with digital assets. According to the results, most of the countries’ residents are financially savvy and invest in meaningful and long-term goals. 69% of them are engaging in cryptocurrency to give their families a better life.
On closer examination, 48% of their salaries would invest in digital assets to pay for their children’s future education. In comparison, 43% would do the same to create a fund to pass on to their relatives. Only 3% said they do not have a clear plan when making their investment decisions.
Marius Ritz – General Manager Lunos for Africa – described He calls the situation a “cryptocurrency revolution,” adding that there is huge potential in developing countries. However, a large percentage of the African locals lack basic knowledge about cryptocurrencies, which is why they will not invest in it. Fifty-five percent of Nigerians said they knew nothing about this asset class, while the percentages in South Africa and Kenya were 56% and 64%, respectively. This once again shows the potential that can be unlocked when more people in developing countries engage with digital assets.
What does the future look like?
There is no longer any doubt that third world countries are on their way to becoming true crypto nations. Meanwhile, developing countries around the world are busy adapting laws and legal regulations to the future of cryptocurrencies.
Africa currently leads in the volume of trade. In the next five years, Africa will become the leading Bitcoin crypto continent with its exponential growth in volume. It will grow in ways no one could imagine. In addition, a massive explosion has been observed with the COVID crisis.” – Ray YoussefCEO of Paxful, a popular P2P platform
For example, Nigeria, the largest economy in Africa, has legalized cryptocurrencies and issued guidelines for digital currencies and businesses. After the successful implementation of Bitcoin in El Salvador Some African and other Latin American countries could now follow suit.