El Salvador attracted global attention when it became the first nation to make Bitcoin equivalent to the US dollar as the country’s official tender. This unconventional financial move by the national government has made critics and supporters both in and outside the country. This move is meant to serve a dominantly unbanked population of Salvadorans financial services. Sentiments like a feeling of uncertainty and not being able to make their voices heard have pervaded some Salvadorans.
Countries always want the economic betterment of the population. However, not all countries want to follow through with the scheme made by El Salvador in adopting Bitcoin as a legal tender. Here are some ways how emerging markets can adopt cryptocurrency without involving national governments.
Providing financial opportunities to the unbanked population to Latin America
Almost 50 per cent of the Latin America and Caribbean (LAC) population were unbanked or did not have access to financial services or a bank account, according to an August 2021 report by the World Bank. Various reasons are behind why these individuals are unbanked, such as distance from financial institutions, high cost of account maintenance, lack of trust, and lack of required documentation.
There are huge hindrances to unbanked individuals, such as difficulty in saving money, receiving remittances, transferring funds outside their communities, or gaining access to credit and their credit scores. Thus, an unbanked person could not literally function the daily financial transactions that most of the population take for granted.
Cryptocurrencies are transforming the lives of these unbanked populations by providing them access to digital financial services such as lending platforms, savings applications, and micro-insurance solutions from their mobile phones with fewer technical issues and fees that are lower compared to what banks and other traditional financial institutions require. Accessibility, affordability, and anonymity are the three features of cryptocurrencies that make Bitcoins highly attractive for the unbanked population in nations like El Salvador.
Deciphering government intervention
The significance of contrasting impact and implementation cannot be undermined. There would be a positive impact on unbanked populations when a nation pushes for mass cryptocurrency adoption. However, providing another means for obtaining basic financial services will require more strategies to push for the adoption.
El Salvador decided to intervene using the coffers of the nation. It legalised Bitcoin as legal tender as a part of a greater action plan of solving the perennial problem of poverty in El Salvador. The government chose to gamble its national reserves in Bitcoin despite the high risk involved with market volatility in favour of the possible earnings the country could gain and being committed to its pledge of building public facilities such as schools and hospitals across the country.
Ways on Adopting Bitcoin into the Mainstream
However, there are other alternatives other than government intervention when it comes to adopting Bitcoin into the mainstream. Different Latin American governments are not in favour of accepting Bitcoin as legal tender. Thus, adoption might happen if it comes from the bottom or from the grassroots level.
A wider range of mobile accessibility
In order to achieve mass adoption of cryptocurrency, users should be provided with mobile-friendly alternatives by financial technology firms that cater for the crypto environment. Less than half of the citizens in Latin America and the Caribbean have fixed broadband connectivity, 87% reside within a 4G signal range, and 9.9% have high-quality fibre connectivity at their residential locations. If these are resolved, there would be a 37% increase in the number of persons who could gain access to financial services when made available on mobile phones. New users would be more engaged and find it convenient to use this innovative technology.
Provide educational services
The crypto space is seeing the rise of mobile-friendly crypto offerings. However, people cannot trust a system that they do not fully understand. People prefer to be unbanked because of the lack of trust in financial technology. Bitcoin Era provides goog services for crypto trading, for beginners.
Trust in cryptocurrencies could be increased when fintech develop educational programs that discuss the nuances of cryptocurrencies and the benefits these could provide. Learn-to-earn programs (like that of Rabbithole) are set up by Fintech companies, so users can be rewarded if they participate and learn decentralised applications (dApps). When people have the knowledge, they learn to trust technologies.
End financial hindrances
A user must have basic funds in order to begin transacting. Digital currency adoption can be highly encouraged through universal basic income (UBI) initiatives by providing a source of income. Presently, ImpactMarket is taking the lead for UBI in the blockchain environment. Its decentralised poverty alleviation protocol allows the creation and distribution of unconditional basic income between communities and their grantees. When users receive digital assets through platforms that are into education plus mobile-friendly, users will adopt the technology without imposing it upon them.
Pushing for institutional adoption
Institutional adoption is the key to making it happen. New users will be attracted to UBI, education, and mobile access. However, if they cannot see the application of crypto in their lives, this would not be possible. The Grameen Foundation and CARE are some groups that have integrated blockchain into their transactions by providing help in the Philippines and in Ecuador, respectively. When companies and establishments use crypto in the furtherance of their goal, they motivate the grantees into trusting the technology.
Considering for other Cryptocurrency
El Salvador’s adoption of crypto as legal tender is a strong endorsement for crypto to be acknowledged by other nations. However, Bitcoin is not the sole crypto that could bring financial services to the unbanked population. Lower gas fees and smaller impacts to the environment are offered by other crypto-coins. Moreover, a more secure option to the market price volatility of Bitcoin is through stable coins.
It is significant to note how different kinds of cryptocurrencies and stable coins could provide low gas fees and price stability and speedier transactions in providing the unbanked population with affordable and accessible financial services.
Conclusion
The move to legalise crypto as legal tender in El Salvador merits both amazement and worry to different individuals. Other available alternatives in achieving mass adoption of cryptocurrency would definitely benefit emerging markets without national intervention.
