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They say that necessity is the mother of invention.
Banks, governments, intermediaries, and third parties have inherently been a part of the rent-seeking fiat currency system, sucking our labor’s value away from us, when instead, we’d intended to store our exchanged time and labor in this rechargeable battery called money.
However, the malfeasance of the central banks’ oversight, and their repeated history of abuses of authority and trust (i.e., money printing, reducing the percentage of silver in a government-issued currency, etc.), made people worldwide know that they had long ago lost control over their hard-earned and sometimes harder-saved money. This almost single-handedly led to the creation of bitcoin, which was launched entirely to eliminate all unnecessary entities and third-party intermediaries and their friction, thus giving all people worldwide the potential to maintain 100% exclusive control of and authority over their life savings.
Bitcoin’s maturation journey over the years has been nothing short of phenomenal. Skepticism was prevalent during the early days while widescale adoption rates were scanty. However, thanks partly to timely upgrades and bitcoin’s numerous evolving use cases becoming quite apparent to more and more people worldwide, bitcoin has grown to become a household name.
From retail investors to well-established names from the western world’s traditional financial (TradFi) realm, bitcoin has managed to entice almost every user category imaginable. Notably, developing countries — especially those already ravaged by hyperinflation and dictatorial regimes — have played a critical role in steepening bitcoin’s adoption curve.
Bitcoin As A Tool for Financial Empowerment
Owing to its decentralized and borderless nature, bitcoin has been able to provide extremely remote users connectivity with the entire world and the ability to participate in trade and commerce . Even those born in underprivileged situations without any banking access or government-issued ID can now offer their time, goods, and services to millions of potential customers and clients worldwide.
The numbers speak for themselves. Take Nigeria, for example:
The World Bank has time and again pointed out that this western African nation significantly contributes to the number of unbanked people around the world. A Consensys survey from 2023 revealed that cryptocurrency awareness was highest in Nigeria compared to all other countries, with 99% of males and 100% of females asserting that they had heard of the asset class.
78% affirmed knowing how cryptocurrency functions. When it comes to investing in cryptocurrency, only 5%-6% of respondents from Nigeria were hesitant. The other 57% claimed that they will “definitely” invest in cryptocurrency over the next 12 months, while 33% asserted that they will “probably” invest.
The excessive middlemen fees and unreasonable sanctions and restrictions inherent in TradFi have enticed people worldwide to increasingly investigate digital currencies. This is largely thanks to features like a peer-to-peer (P2P) design that enables value transfer transactions that never require “authorization” (and therefore can’t be declined either) to move freely amongst individuals, rather than through institutions. “Rules not rulers” is the enduring mantra.
The lack of rent seekers in the middle reduces the transfer fees greatly in most cases, and increases efficiency in remittance markets, especially while making international transfers. Ultimately, this makes using bitcoin more affordable for people underserved by the TradFi system, especially in regions with soaring remittance fees.
Several nations across the world remain plagued by economic instability. In the last five years, bitcoin has fetched hodlers roughly 1400% returns, while Reliance Industries, one of India’s top stocks, has only risen by 140% in this same duration. Bitcoin’s ROI is much higher when the time duration is zoomed out even further, indicating that the king coin has shielded investors better than TradFi alternatives by smashing through public skepticism and assuming the now-dominant role of both an inflation hedge and a store of value. However, whether or not bitcoin will finally conquer the challenge of becoming, as advertised, our true peer-to-peer digital currency, suited for that daily cup of coffee, remains to be proven.
Adoption Of Bitcoin In Developing Countries
Bear markets have hindered bitcoin’s adoption, but on the wider macro timeframe, it’s clear that the asset’s adoption curve continues to ascend.
A recent report by Chainalysis pointed out that developing countries from Asian and African regions dominated the cryptocurrency adoption index. India occupied the first position, followed by Nigeria and Vietnam. Places like the Philippines, Indonesia, Pakistan, and Thailand were also a part of the top ten on the list.
Several factors like currency devaluation, limited access to traditional banking services, youth having a growing interest in modern fin-tech solutions, and high smartphone penetration have been the key drivers.
Chainalysis pointed out,
“Crypto(currency) adoption is strongest in countries categorized by the World Bank as lower middle income (LMI). This is crucial, as LMI countries account for a plurality of the world’s population at 40%.”
Challenges And Barriers To Adoption
Bitcoin has inherently been an upwardly volatile asset, historically setting off caution bells for potential investors still unfamiliar with bitcoin’s actual properties — its use cases — which define its market value.
That same volatility is a double-edged sword.
On one hand, it can help investors actualize quick gains, while on the other, it also possesses the potential to slash down their investment value within minutes. This is one of the main reasons why several regulators around the world continue to remain skeptical about bitcoin.
However, it should be noted that the very large bitcoin purchases that began occurring with the approval of exchange-traded funds (ETFs) in the U.S. are long-term holds, widely expected to ease the sudden drops and famed bitcoin volatility.
Time will tell.
Some countries, such as India, have outright banned bitcoin and other cryptocurrency assets in the past. However, with time, they ended up revoking the same ban, and instead implemented the obligatory deterrent of taxes on profits. Regulators around the world have been following similar paths by adopting measures, including mandatory licensing of exchanges, and an overall tightening up of the legislative screws to safeguard the interests of investors.
On the other side of the spectrum, there are countries like El Salvador where the government has wholeheartedly adopted bitcoin, and even encouraged citizens to follow suit by making this digital currency their legally accepted tender.
In some countries, investors have appreciated the clarity provided, while in other countries, dissatisfaction about the stringency continues to prevail, obstructing the path of mass adoption. Adding to the barriers, the lack of digital literacy, limited internet access in rural areas, and the slow development of financial infrastructures have also caused hindrances to a certain extent.
Solutions And Strategies For Overcoming Challenges
Investing in digital literacy and outreach programs to educate people about bitcoin and its underlying technology will help improve adoption. Parallelly, tie-ups involving stalwarts from the cryptocurrency space would help spread awareness and help people truly understand the benefits of adopting bitcoin (and others) as currencies and a viable asset class. This, in turn, would equip them to take calculated risks in hopes of high ROIs.
Additionally, developing localized solutions tailored to the specific needs and preferences of users in different regions could also prove beneficial. Keeping the government involved while trying to notch up bitcoin’s adoption and usage would give investors additional confidence and make it a win/win for all parties.
The Future of Bitcoin In Developing Countries
In several regions, people from the cryptocurrency community have been actively trying to assist with outreach and education in rural regions, leading to increased knowledge and adoption. In Africa, for example, where internet penetration has always been a problem, Kgothatso Ngako, a native software developer, developed Machankura — a tool to “tackle this issue.” Machankura leverages the Lightning Network, allowing Africans to send and receive bitcoin with basic non-smart mobile phones.
Bitcoin aside, several emerging technology sectors like DeFi give people access to global markets. In fact, by providing liquidity on decentralized exchanges (DEXes), investors can take part in yield farming, thus accessing interesting and potentially lucrative trading and investment opportunities from anywhere in the world. This synergizes with bitcoin and other tokenized assets by expanding their utility and accessibility, amplifying their role as a decentralized and borderless store of value and financial instrument.
Paving The Road For Bitcoin Empowerment
In developing countries, bitcoin serves as a beacon of hope offering financial inclusion and access to global markets for many who have been left behind or completely excluded by the TradFi system.
Yet, amidst this promise lies a tangled web of challenges — from the regulatory point of view to technological barriers — stifling the transformative potential many others — like El Salvador — already embrace. With continued improvements to global bitcoin education, accessibility, and utility, barriers to adoption can be broken down to pave the way for a future where bitcoin can truly redefine the financial landscape.
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