Will Cryptoec Contribute to the Redistribution of Wealth in the World?
RegulationBit News Today2 min read
In recent years, the cryptocurrency boom has mostly been viewed as an opportunity for the wealthy and tech-savvy. Investment gurus tout Bitcoin and Ether as fast paths to get-rich-quick schemes. But there's evidence that crypto is having a wider impact. Uptake in developing nations suggests that cryptocurrencies could help the poor by lowering transaction costs and increasing financial inclusion.
How? By allowing them to participate in the global economy.
In many developing nations, the poor rely on cash for all transactions. Paper money is inefficient - it's expensive to print, store and transport. There are high fees for sending and receiving cash across borders. Corruption is rampant. Global estimates for money laundering through cash flows can be a shocking per cent of GDP.
In contrast, cryptocurrencies offer the possibility of fast, secure, low-fee transactions over the internet, even on the most basic smartphones. A simple app can send crypto from one digital wallet to another, from person to person, or from person to business, with no middle-man. This allows more money to go directly to the people who need it.
In the developing world, people are already discovering this. In Venezuela, where the government is printing so many bills that cash loses value daily, the poor are flocking to cryptocurrencies. Many poor Indians use crypto apps like BitPesa to send remittances from abroad. Africa and South America are hotbeds of crypto entrepreneurship. ## Crypto Drawbacks and Risks
Of course, cryptocurrency is not all upside. This year, a sharp drop in asset prices revealed that investing in crypto is risky. Manipulation and fraud are rampant. Limited government regulation forces crypto holders to shoulder the burden of security and risk of loss. Because cryptocurrency is still so volatile, some users are hesitant to spend it. Crypto still requires technological literacy.
What's more, even enthusiasts worry that the hype around crypto will make it a new target for scams and tax evasion, to the detriment of the poor.
As crypto adoption soars, so too do concerns about security and environmental impact. As the technology spreads to more people, the risk of hacks and loss grows. Bitcoin's energy-hungry blockchain is already generating enough greenhouse gas to pollute a small nation, and that's when about 1% of the world's population uses it. ## A Gradual Transformation
Nonetheless, crypto is still decades ahead of traditional banking in many developing countries, and seems set to grow. In India, lack of access to banks or ATMs in rural areas is a major barrier to progress. Crypto could provide a way out.
Whether or not Mr. McAfee's prediction comes true anytime soon, the tech has the potential to reduce inequality and improve everyone's quality of life. On a smaller scale, cryptocurrency is being tested as a model for social welfare and development. In Guyana, it's used to buy food for the poor. Aid groups use it to circumvent government corruption and deliver money directly to recipients.
