Cryptocurrency has had a rough ride at times, but that doesn’t mean it can’t be a game changer. Cryptocurrency will usher in an era that will be characterized by true financial freedom, where those within the system will be empowered, and those without will be marginalized. Here are the 5 reasons why:
Cryptocurrency is a system of digital money that is becoming a major part of the global financial market. As cryptocurrencies grow in value and functionality, new and innovative ways to use them, such as initial coin offerings (ICOs), have become popular.
Lawrence Newman, co-founder of Coinmama
Bitcoin is the harbinger of financial freedom – freedom from poverty, inflation and corrupt regimes. Unlike fiat currencies, it connects people directly to the global economy, enables peer-to-peer transactions, and protects wealth from the instability of monetary policy and government control. As the use of cryptocurrencies continues to grow – there are already some 40 million Bitcoin wallets – the cryptocurrency economy will grow and offer true financial freedom to people around the world.
Communication with non-banking institutions
In the poorest parts of the world, governments and aid agencies are trying to find ways to connect people without IDs or mailing addresses to traditional banking systems. While mobile banking and mobile services have helped close the gap in recent years, 1.7 billion people are still not connected to a bank. These billions of people experience a lack of freedom precisely because of poverty: Their exclusion from the world economy makes it almost impossible to change their position. Bitcoin will change this.
If they can only rely on traditional banking solutions, even if they are provided by mobile services, the non-banks are unlikely to have a bank. Institutional requirements developed in and for developed countries, such as driver’s licenses, prevent rural residents from connecting to the global economy. Traditional banking services have fees and access requirements that bitcoin does not.
First, cryptocurrencies and DeFi platforms have proven to be much more supportive of digital identity solutions, which are essential in the fight against poverty. Digital identifiers enable new methods of identity verification and, in the case of banks, know your customer (KYC). In addition, digital credentials facilitate remote access to crypto-currency exchanges and can be processed more securely through blockchain technology. By connecting to the global crypto economy, people can exchange value without government oversight or the high costs associated with bank transfers.
The use of cryptocurrencies for money transfers is an indicator. In countries where money transfers are essential for survival, cryptocurrencies are now being used as a means of transfer and exchange. A third of Nigerians use or own cryptocurrencies, followed by Vietnam and the Philippines. As more than a billion people without access to official identification have been able to obtain legally recognized IDs through innovative programs such as ID2020 (although there are many others, some sponsored by countries), and as the use of mobile devices continues to increase, we will undoubtedly see a deeper penetration of cryptocurrencies in developing countries.
Helping people succeed despite inflation
In addition to poverty, many people looking into cryptocurrencies are dealing with unpredictable monetary policy and the inflation that comes with it. Take a look at the countries with the highest percentage of people attracted to cryptocurrencies. Nigeria tops the list, followed by countries like South Africa, Argentina, Turkey and others with inflation rates of 11% or more. These populations organically accept bitcoin and other cryptocurrencies as the preferred means of exchange. The change could be more formal.
Historically, the US dollar has played a crucial role in protecting asset trading from the hyperinflation associated with troubled fiat economies. Cambodia, El Salvador, Honduras, Somalia, Panama and other countries accept both US dollars and the local currency.
However, defense spending, recessions, and COVID-19 have led to a sharp increase in U.S. government debt, which has undermined confidence in the U.S. dollar and contributed to rising inflation. Since this year, El Salvador accepts bitcoin, in addition to the dollar and colón. Other countries could follow suit and replace the US dollar as the lingua franca of the global economy.
The US dollar is not the only one. Customers of Cyprus-based Laiki Bank suffered financial losses of €3.4 billion during the 2013 eurozone crisis. This event, known as the Cyprus haircut, sparked a bitcoin gold rush. Regardless of its launch, the appeal of cryptocurrencies to residents of emerging markets is clear: They give people the freedom to act outside the constraints imposed by wildly unpredictable inflation. If people are protected from fluctuations in the value of the national currency, we will see the average GDP per capita rise and stabilize as the number of Bitcoin wallets increases.
Bitcoin offers a crucial third path to financial freedom. This allows people living in totalitarian regimes to protect themselves from the possibility of their financial assets being seized. Cash can be seized at any time, and state-backed banks must confirm the exchange. This is not the case with bitcoin.
When people store valuables in fiat currency, governments can put pressure on dissidents by freezing their assets, depriving them of their income and livelihoods. Ultimately, this discourages people from expressing unpopular opinions that could lead to civil and political change. Since bitcoin is both an asset and a record of monetary transactions, people can free themselves from the threat of oppression by using it as a store of value and a means of payment. Ultimately, this will allow people to act with more confidence against oppression and protect their property when they do.
You can’t buy freedom… But it can be divided
A crypto revolution is brewing on the world stage that will lead to poverty reduction and financial censorship. Bitcoin adoption worldwide is growing rapidly, with 20% of the 38 million wallets added last year. Acceptance among the world’s population is increasing, especially among women, who are often the main drivers of economic activity in emerging countries. While the first Bitcoin users made headlines by telling us that their net worth had increased exponentially overnight, Bitcoin would make history by becoming a truly global currency that would usher in an era of financial freedom that our world had never seen before.
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