Crypto Is the Revolution Leading Developing Countries to Financial Inclusion

Back when digitized banking service evolutions such as debit cards, online banking and check imaging were sweeping the financial sector, one could have never imagined what was coming next. I certainly did not, having spent more than 10 years during this time advising executives of major global banks on the implementation of these game-changing technologies.

The creation and digitization of new currencies, not owned by the government but by the people, has found its home in the global market over the last decade, starting with Bitcoin (BTC) and soon exploding to thousands of alternative digital currencies available for exchange and with a total valuation of $285 billion, each with its own form of value and usage.

When it comes to developing countries, in particular Africa, and why this revolution will usher in people’s financial independence and inclusion, we start with the eye-opening reality that African users have essentially leapfrogged developed nations in usage of both technology — where mobile phones have long been the African primary tool of choice for business and daily life exchanges — and also in terms of their cryptocurrency usage and adoption.

The key factor in these realities is found in the youth. The continent boasts the world’s youngest population, with 200 million people between the ages of 15 and 24 — and it continues to grow. Having been born well into the age of technology, today’s youth are naturally more adept than their seniors in terms of understanding and leveraging mobile technology, cryptocurrency and related online tools and services. By 2045, the African workforce will be the world’s largest.

We then move into the second-largest factor that prohibits financial inclusion, and where cryptocurrency unleashes a radical empowerment to rising entrepreneurs. Cryptocurrency and related blockchain companies have brought to market financial tools and services that allow for seamless and affordable exchange (globally and locally) and a more secure store of value without users having to hold their assets a bank account or secure credit card debt.

With the rise of tools such as m-Pesa in markets such as Kenya, where its use accounts for close to half of the country’s GDP, we can clearly see the need for simple tools allowing for the transfer of assets (i.e., remittances or transfers across borders), all the way to purchase of goods and services digitally without the need for a bank or credit card. As the world cries to “bank the unbanked,” Africa has another opportunity to leapfrog into the most modern technologies and models.

But why is Africa having its own cryptocurrency important for these types of models to succeed, and why do we need more than one? Another question often asked is, “Why not just use Bitcoin?”

The answer to the first question lies in the complications of banking the unbanked and whether it’s even necessary. Over 1.7 billion people globally are unbanked, lacking a bank account or credit card to partake in the tools and services that create economic sustainability. This limits their ability to engage in the global economy and grow their business possibilities. Cryptocurrencies provide a new way to enter the global market, using a new form of stored value as a way to transact without bank accounts and credit cards that amass debt.

The answer to the second question, “Why not just use Bitcoin?” lies in the history and origin of Bitcoin itself. Bitcoin resulted from Satoshi Nakamoto’s vision to provide a peer-to-peer decentralized financial exchange of value, a vision that has most certainly been realized. The need was clear: A digital currency, traded peer-to-peer that cuts out the middlemen, providing direct and fast exchange at a fraction of the cost, has been established and is flourishing.

Bitcoin has proven, not just for Africa but for the world, that specific use cases (peer-to-peer direct value exchange, in this case) command and can sustain their own currency. What Bitcoin didn’t offer was a business mission, model, roadmap, leadership or even a dedicated team. Its completely decentralized nature goes against this very premise. Nor was it built for the type of transactions necessary for facilitating the business and life activities we all engage in on a daily basis. Bitcoin is simply too speculative, volatile and unpredictable to serve these types of uses.

Alternatively, by taking a semi-decentralized approach, entire marketplaces can create their own currencies, offering decentralized solutions for all types of use cases but is supported by a centralized company and leadership, where key components are in place for growing and operating a successful business with more inherent trust and support for the people.

It’s important to note that creating new stores of values within ecosystems such as those described above have already been applied successfully within the gaming ecosystems that our children fervently play, such as Minecraft and Roblox — so this is not a new concept. In creating your own central currency within an ecosystem, you’re establishing, from a financial perspective, an agreed value of what the currency can trade for within your local environment for the goods and services you are offering, based on the desire of the users and the willingness of the vendors to provide offerings within it.

Let’s take this further and imagine the United States dollar was failing but a newly established digital currency (such as Amazon Coin, for instance) was holding its value well and you trusted that you could make use of needed daily services on its platform, would you move a significant store of your assets into this new coin? It’s not hard to imagine at all.

Then, as the internal ecosystem value is established, this value can be taken outside of the ecosystem. As long as people in the local community perceive the currency’s value to do something and hold established value, they are willing to accept it for payment in the local community. Focusing on this aspect as a provider of financial services ensures that the local market has liquidity and ease of transfer with a given currency.

Now to go back to why not just use Bitcoin. With no guiding model, plan or people operating it, and with no third-party vendors helping to validate the value, the probability that it will have volatile swings is not only quite likely, but almost guaranteed — we only have to look at daily crypto news to see how much is written about its volatility.

For developing countries, these swings are the same, as they experience with their own local fiat currencies, which have high inflation, volatility and a lack of trust of leadership.

A great example of how Bitcoin isn’t built predominantly for the developing world and why this market is wide open for adoption of different forms of cryptocurrency is seen in the African people’s adoption and usage of prepaid mobile minutes. What we have found is that individuals in Africa are so comfortable with holding value and using prepaid cell phone minutes that they are even people with the lofty title of “minitaires,” or people holding a million prepaid minutes.

With these prepaid minutes, they trade with each other and local vendors for goods and services. The lack of trust, volatility and inflation seen in African currencies (more than 40 currencies across the continent) as well as the difficulty in exchanging between them, caused locals to seek other tools for holding value that could also be used cross-border. 

Which brings me back to the story of our children, the youth and the young, rising entrepreneurs in Africa, who are not only leapfrogging our understanding and usage of cryptocurrency, but who more quickly understand that currency is just about moving value to where one needs it to go, seeking the highest interoperability between assets, and having a suite of options and services available to facilitate growth and development. 

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Lynn Liss is the chief operating officer and co-founder at Akoin. Lynn has more than 10 years experience in the social impact sector, advising, building, executing and operating innovative business models. Lynn was a founding partner at ICO Impact Group, providing strategic advice to blockchain companies and cryptocurrencies with a social impact.