An introduction to cryptocurrencies
Cryptocurrencies are digital or virtual currencies secured by cryptography. They are decentralized in nature and to fully grasp the impact of cryptocurrencies on develop ing nations it is necessary to understand the pros and cons of cryptocurrencies and the opportunities it presents to it’s users compared to fiat currencies such as the naira and dollars issued by a central banks.
Cryptocurrencies have their dark sides as some would like to say. But its benefits and the impact of cryptocurrencies on developing countries cannot be over emphasized. Hence we would take a look at the pros and cons of cryptocurrencies compared to fiat currencies which are a centralized system of finance.
Pros and cons of cryptocurrencies
The first advantage we would be looking at is it’s transparency, record data of cryptocurrency transactions are readily available on the blockchain and accessible to everyone, therefore transactions can not be manipulated by individuals or organizations. Hence cryptocurrencies transparency greatly diminishes the risk of fraud and corruption.
Cryptocurrencies are not government regulated and as such eliminates unnecessary
charges like the electronic transfer service charge, thus the cost of transactions are
very low when compared to fiat currencies. Also because cryptocurrencies do not require brick and mortar building neither does it require the services of employees and the wages that comes with it, hence the cost associated with these naturally morph into low transaction fees
Another benefit of cryptocurrencies on global financing is its capacity to serve as fast and secured means of payment which makes inter border transfer timely and more convenient. Cross-border payments are the most significant use case for cryptocurrencies, due to the reduced transaction time and costs. Cryptocurrencies
are decentralized and not government regulated, there is no geographic restriction
and hence cryptocurrencies can facilitate global transactions at very low cost without
any mediating institution.
Also cryptocurrencies support financial inclusion, which is a major impact of cryptocurrencies on developing countries as these nations lack basic banking services. Cryptocurrencies are a lot more accessible and come with an ease to use
platform without much requirement when compared to banks and other financial institutions. Plus there are a lot of applications and programs that facilitate the use of cryptocurrencies and bringing them closer to the unbanked.
However with the ease of inter border transfers and the anonymity cryptocurrencies
offer it’s users can also facilitate money laundering and terrorist acts. Crypto
currency’s independent border payment makes it easy to move money across border
even money gotten from illegal activities and money intended to fund terrorism can be moved swiftly without interference from financial institution or government
regulation as opposed to fiat currency where the money has to go through the banks and individual identity vetted through KYC.
The high volatility of bitcoin and cryptocurrencies in general is quite alarming which
has led to cryptocurrency ban in some countries. However a major characteristics of
money is its general acceptance regardless of region or tribe, though it is without
doubt that bitcoin has gained global recognition and acceptance to a large extent,
nevertheless there countries where the use of bitcoin has been banned and not
accepted as a form of payment, also countries where strict regulations have been
put in place to prevent the risks associated with cryptocurrencies, makes it arguable
if cryptocurrencies actually meet every criteria for it to be used as a means of exchange.
Opportunities presented by cryptocurrencies in developing countries
There are numerous challenges faced by people and organizations in economic
developing countries that the impact of cryptocurrencies on developing countries can
not be over emphasized. For one, crypto currencies can accelerate the development
process potentially in various industries. Let’s take a look at the banking industry, where the majority lack access to basic financial services and some do not own a bank account due to the numerous requirements to open an account. But with crypto currencies one only needs access to the internet and a smart device to send money to anyone and receive money from anywhere in the world.
Another opportunity presented by cryptocurrencies in developing countries is an increased participation in international trade as bitcoin and other cryptocurrencies can help facilitate payments in an efficient and timely manner without the need to own a bank account.
Also there is an issue of trust speaking of corrupt political officials and government
inflated budgets, the masses do not trust the government. But with the transparency
of cryptocurrencies all transactions can be monitored on the blockchain. Hence curb
the embezzlement of public funds and the government tracking their expenditure for
Despite the pros of cryptocurrencies outweighing the cons, the impact of crypto
currencies in developing countries is yet to be acknowledged by governments who
have prevented its use in their country. Although the technology surrounding
cryptocurrency is at its infancy stage, it is only a matter of time before these
governments embrace this technology just like the internet in the early 1990’s.
Cryptocurrencies have the potential to strengthen the development of an economy,
however, it is upon the government of a nation to put in-place policies that will
encourage the adoption of cryptocurrencies to foster economic development.