Today we will talk about cryptocurrency and how it can help in economic development. To do that I will first explain the concept of cryptocurrency. Cryptocurrencies are digital currencies, which just like regular money are meant to be a medium of exchange. It uses cryptography to verify transactions and to create new units of cryptocurrency. It is essentially a complicated formula that only the owner of the currency has the answer to. The way these currencies are verified is through ‘miners’ who essentially confirm transactions. That is to say their computers do. As anyone with the right equipment and programs can become a miner, it is a decentralized system. It being decentralized means it is a very anonymous way of making transactions, as there’s no central entity to control transactions. This has of course sparked some questions about legality as it is a good medium to conduct less than savory transactions with.
Now how can developing countries use these currencies? One way is through remittance, remittance is when people who emigrated from developing countries send money back home. Usually this is done through services like Western Union, which of course comes with transaction fees. In 2016 a total of $441 Billion was sent to developing countries this way, with transactions fees up to 10% a huge amount of that went to companies like Western Union and Money Gram. Those costs could be lowered significantly through the use of cryptocurrencies, meaning more money actually gets to the developing countries.
A second way it can help them is through financial inclusion. Worldwide around 2 Billion people do not have access to banking services. However many of those 2 Billion do have access to mobile phones and phone plans, which allows them to use, trade and manage cryptocurrencies. It also provides immediate access to an international payment system, something which many companies in developing countries lack and which are too hard to obtain through traditional means. This allows bypassing the problem of not having access to currency exchange, which allows for a bigger market and more exports.
These are of course just a few examples of how cryptocurrency could be used to the benefit of developing countries. If you have any additional examples of benefits or even dangers of cryptocurrencies let me know. And especially let me know what kind of impact you think cryptocurrencies will have on developing countries, positive, negative or a mixed bag.
Sources
Bejamin Williams, M. G. (2017, July 18). Economic Development on the Blockchain. Retrieved from aier.org: https://www.aier.org/article/economic-development-blockchain
Coin Telegraph. (n.d.). What is cryptocurrency? Retrieved from cointelegraph.com: https://cointelegraph.com/bitcoin-for-beginners/what-are-cryptocurrencies
The Mission. (2018, February 12). How cryptocurrency can help developing countries. Retrieved from medium.com: https://medium.com/the-mission/how-cryptocurrency-can-help-developing-countries-2a720192ba6a
Economic Development in Tanzania 