Cryptocurrencies Are A Tool To Fight Global Financial Inequality

Godfrey  |  Mar 9, 2021

Cryptocurrencies which are also known as Digital currencies are becoming commonplace in our world today with an estimated 8,700 of them listed on CoinMarketCap. These digital currencies are simply virtual money that has inherent value in them and can serve as an alternative to fiat currencies issued by Central Banks around the world.

Fundamental Difference Between Cryptocurrencies and Fiat

Besides the fact that cryptocurrencies are digital money, there are a lot of other marked differences between their underlying fundamentals and that of fiat currencies. Here are a few of these highlighted differences;

  • Issuance and Governance: While fiat monies are issued by a government-backed Central Monetary Authority, cryptocurrencies are a product of private tech organizations, mostly driven by the desire to apply tech innovation to bring financial products to life. The fact that fiat money is from a Central body, all policies governing its circulation are made by such bodies with vested power. 
  • Transaction Model: For fiat money to be transacted, there must be a middle man or licensed financial institution to broker such transaction. Digital currencies boycott these middlemen, providing transactions in a decentralized and peer-to-peer manner.
  • Privacy: Fiat money transaction details are kept by the financial institutions but though transactions with cryptocurrencies are registered on public blockchain ledgers, they are pseudonymous in nature, meaning the identities of those involved in the transactions are shielded.
  • The differences in these types of currencies are numerous but these few give the basis for the subject matter, how cryptocurrencies can serve as a tool to fight financial inequality in our world today.

    The Basis of Financial Inequality and The Role of Crypto

    Drawing from the knowledge of how monetary institutions work, it is worth noting that the imbalance in financial opportunities in the world is systemic, implying that the clamor to embrace more flexibility in monetary stance to accommodate moe marginalized people is marred by policies that hinder some specialized access to funds or other products.

    As it stands in most countries, access to a bank account by any individual can only be achieved after meeting the minimum age requirement, obtain legal documents amongst other government-imposed requirements. This is the most basic requirement to get financially included, and while Central Banks are lowering this standard, access to services such as loans, competitive savings products are all beyond the reach of the common man.

    Decentralized Finance

    The advent of digital currencies tends to change this status quo. Anyone, irrespective of their age can own a crypto wallet and receive funds without the hassles inherent under core banking conditions. The evolution of the cryptocurrency and blockchain ecosystem has introduced new innovations including decentralized finance amongst others.

    Decentralized finance (DeFi) on its part brings the true disruption that ushers in the financial inclusion that the world clamors. With unhindered access to loans, savings products with rates that dwarf those provided by banking institutions, and the provision of benefits to users providing liquidity (funds) to DeFi applications, the world is gradually attaining the financial empowerment which has been absent for ages.

    Cryptocurrencies and the many iterations of the technology are relatively still in their infancy, but with the foundation, it has laid, the journey to attain unbiased access to financial products is best guaranteed with digital currencies than the current Central Bank’s provision.

    Related News