Understanding alternatives to government intervention
Last year, El Salvador made headlines as the first country to adopt Bitcoin as legal tender. The move is controversial both inside and outside the country, heralded for its potential to bring financial services to much of El Salvador’s unbanked population and criticized for its top-down implementation. This created a sense of uncertainty and made some Salvadorans feel they had no choice, although places like El Zonte already accept Bitcoin (BTC) as payment through earlier organic developments. to the law.
These arguments, although for and against the law, do not actually exist in contradiction to each other. Although the decision may have been made by the government, it is bringing financial services to new parts of the population. However, not all governments are interested in declaring Bitcoin legal tender, which leaves us pondering a new question: how can we encourage crypto adoption in emerging markets like El Salvador without involving governments?
Related: What’s Really Behind El Salvador’s ‘Bitcoin Law’? Experts answer
Banking the Unbanked in Latin America
In August 2021, the World Bank reported that almost half of the population in Latin America and the Caribbean (LAC) is unbanked, meaning they do not have access to a bank account or other financial services. These unbanked people cited the cost of maintaining an account, distance from financial institutions, lack of necessary documentation, and lack of trust among the most common reasons for being unbanked.
Being unbanked poses major challenges, making it difficult for individuals to securely receive payments, save money, transfer funds outside of their communities, or access credit and their credit ratings. In short, being unbanked can make it nearly impossible for individuals to perform the day-to-day financial transactions that many of us take for granted.
Cryptocurrencies are changing that by helping individuals access online financial services such as savings apps, lending platforms and even microinsurance solutions from their mobile devices with far fewer barriers. and for lower fees than those charged by traditional financial institutions. It is these three characteristics of cryptocurrencies – accessibility, affordability and anonymity – that make Bitcoin an attractive option for unbanked banks in countries like El Salvador.
Understanding government intervention
However, it is important to distinguish between impact and implementation. While the mass adoption of cryptocurrencies like Bitcoin can have a profoundly positive impact on unbanked populations, providing a new alternative to access vital financial services will provide more than a few ways to encourage such adoption.
El Salvador chose government intervention, implementing Bitcoin as legal tender as part of a larger strategy to lift El Salvador out of poverty. In fact, the government itself has even chosen to invest its reserves in bitcoin, taking the risk of volatility in favor of potential revenue and fulfilling its promise to support the building of infrastructure like schools and public amenities across the country. country.
Related:El Salvador: how it started and how it went with the Bitcoin law in 2021
Rethinking mainstream adoption
However, government intervention is not the only option. As many Latin American governments express disinterest in accepting Bitcoin as legal tender, we are beginning to consider alternative options to encourage widespread adoption of a more popular view. In my mind, there are five key factors we need to consider: mobile access, education, financial barriers, institutional adoption, and Bitcoin alternatives.
Promote mobile accessibility
For the mass adoption of cryptocurrencies to take hold, fintech companies involved in the crypto space must offer mobile-friendly solutions to users. In Latin America and the Caribbean, less than 50% of the population has fixed broadband connectivity, and only 9.9% have high-quality fiber connectivity at home, while 87% of the population lives within range of a 4G signal. This represents a 37% increase in the number of people who can access financial services when made available on mobile devices. If fintechs can create financial solutions for mobile phones, they can make using this new technology more convenient and intuitive for new users.
Provide educational services
With mobile-friendly crypto offerings already becoming the norm in the crypto space, education is another key consideration. Without a good understanding of what cryptocurrency is and how it works, individuals cannot be expected to trust the technology or use it safely. Lack of trust was among the top reasons people cited for being unbanked.
Related: Mass adoption of blockchain technology is possible and education is key
Fintechs can overcome this hurdle and foster trust in cryptocurrencies by developing transparent educational programs designed to show users what cryptocurrencies are and how they can benefit from the technology. Programs like Rabbithole take this education even further by incentivizing learning through learning programs that reward users for learning how to participate in decentralized applications (DApps). When this education is successful, it can go beyond building trust and inspire communities to build on pre-existing technology, adapting it to meet their needs and bringing even more users into the world. ‘space.
Break down financial barriers
Of course, to start transacting – whether through traditional or technical financial services – users need to have basic funds. Universal Basic Income (UBI) initiatives can be particularly effective in encouraging the adoption of digital currency by providing essential resources (i.e. income). ImpactMarket is currently leading the way for UBI in the blockchain space, enabling the creation and distribution of an unconditional basic income between communities and their beneficiaries through its decentralized poverty alleviation protocol. When funds are sent in the form of digital assets through mobile-friendly educational platforms, they encourage users to adopt the technology without imposing its use on individuals.
Related: How Cryptocurrency Can Help Pay for Universal Basic Income
Encourage institutional adoption
The final piece of this puzzle is institutional adoption. UBI, education and mobile access will only attract new users, especially the otherwise unbanked, so far if they do not see opportunities to transact using currencies digital in everyday life. Groups like CARE and the Grameen Foundation are already incorporating blockchain technology into their transactions using cryptocurrencies to deliver aid in Ecuador and the Philippines, respectively. When institutions use cryptocurrencies to effect positive change, they inspire new trust in technology while making funds available to vulnerable populations.
Get out of bitcoin
Bitcoin’s popularity and El Salvador’s decision to adopt cryptocurrency as legal tender should be seen as a broader endorsement of cryptocurrency. Bitcoin is not the only cryptocurrency capable of bringing financial services to unbanked people around the world. Other cryptocurrencies offer lower gas fees and lower environmental impacts. While stablecoins serve as a safe alternative to Bitcoin’s price volatility.
It is worth considering how a variety of cryptocurrencies and stablecoins with varying advantages such as fast transaction speeds, low gas fees, and price stability, could be combined to provide services to individuals. financial resources more accessible and affordable.
El Salvador’s decision to implement Bitcoin as legal tender may have emerged in recognition of the potential of cryptocurrencies to benefit huge portions of the country’s population, but we cannot expect that. that all countries follow in his footsteps.
Fintech companies entering emerging markets in Latin America and beyond should consider basic alternative strategies to drive crypto adoption – mobile accessibility, education, access to finance, adoption Institutional and Bitcoin alternatives will be essential to encourage mass adoption of cryptocurrencies in emerging markets without involving governments.
To make these changes, it is important to think locally rather than globally. How can we adapt programs to meet these five needs for small communities around the world, helping individuals access digital currencies and financial technologies that meet their distinct and diverse needs?
This article was co-authored by Xochitl Cazador and Angelica Valle.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Xochitl Cazador leads the growth of platforms and builders at the Celo Foundation. She has extensive experience in implementing strategy to drive growth and scale operations. Prior to founding Celo, Xochitl spent 15 years driving growth at Cisco, where she managed a $1 billion investment portfolio and led expansion into 26 emerging markets, resulting in 30% growth. % year over year. Xochitl holds a master’s degree from the Stanford Graduate School of Business.
Angelica Valle is Ecosystem Lead for Mexico at the Celo Foundation, bringing with her over four years of experience in the Mexican blockchain ecosystem. Prior to joining Celo, Angélica founded digital transformation and blockchain consulting agency Oruka where she served as an advisor providing bespoke solutions to governments and businesses involved in the blockchain industry. In addition to her work with the Mexican blockchain ecosystem, Angélica has over 10 years of experience in public policy, social entrepreneurship and innovation.