Financial opportunity starts with access – Academia

Ben Caselin

Hong Kong, China ●
Thu, September 22, 2022


In any democratic society, 86 percent would constitute a supermajority. But according to calculations by the International Monetary Fund, around 86 percent of the world’s population lives in emerging markets, where they have little or no influence on the global economy. That needs to change.

Banks won’t do it, but the disruptive capacity of digital assets could do it.

In terms of human dignity and individual empowerment, substandard financial inclusion has been a mass tragedy – not only in terms of unnecessary suffering, but also in terms of its visibility. Everyone sees it, but massive injustices persist.

Economic security is nowhere guaranteed for anyone, but for emerging economies, deficiencies in other, non-financial, infrastructures are a growing problem. Distance or accessibility alone are significant barriers that have kept people in emerging markets from the global financial system for decades.

It is precisely these hurdles that digitization and digital infrastructures promise to remove.

It is therefore a natural progression that digital assets should play a key role in enhancing financial opportunity in emerging markets; The first step toward opportunity is access.

As Internet connectivity becomes more mobile and digital devices more affordable, opportunities to digitize the entire global economy become not only possible, but inevitable.

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For this reason, it is crucial today to think about how digital assets can improve the lives of the majority of humanity.

Technologies — like blockchain, digital assets, and Bitcoin in particular — could empower 6.5 billion people around the world and help individuals, families, and their community businesses to bring about financial change at scale.

Size matters, because that’s how giant companies become giants; They serve mass markets at prices that mass consumers are willing to pay. This is typically what we call an efficient market, and for all its shortcomings, including bloated CEO salaries, the ease of scaling has proven far better at distributing wealth than most political systems in history.

Imagine if it were possible to offload just a portion of that efficiency to small, local businesses and individuals in emerging markets.

The digitization of sales channels is one way to do this. The digitization of the unit of value – the money itself – is another.

When people talk about “digital disruption,” the disruptors are established — often complacent — market participants. For everyone else, it’s about simplification and lower costs.

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Emerging market consumers often lack the same access to financial systems that we who live in developed markets take for granted. I have often complained about banks and banking systems, which can be corrupt, dysfunctional, or just plain inefficient. There is no need to list all the scandals here; You have read about it extensively. But billions of people around the world cannot even access this level of service.

I believe that the 86 percent of the world’s population who live in emerging markets would benefit greatly from a safe and accessible way of managing money.

Is this a digital bank? Maybe. But why not build the ledger, transaction, borrowing, and lending capabilities provided by banks directly into assets or currencies themselves? Assets that offer their own savings and verification features increase financial efficiency by eliminating significant and redundant costs associated with basic administrative functions.

Banks are already trying to automate processes. If digital assets can be further automated and banks removed from the picture, even greater cost reductions could result.

Like Bitcoin, a blockchain runs decentrally without a single point of failure or one-sided point of intervention. There is no central banker to devalue them. And that’s important because people in many emerging markets can’t even trust their basic fiat currency to do its job.

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Not to mention the banks themselves, currency alone can ironically be a barrier to financial inclusion. That’s an obstacle that Bitcoin is already overcoming.

So when we talk about digital assets, we really are talking about disrupting an established and inefficient status quo.

People living off their daily earnings in emerging markets are not talking about Bitcoin as an investment opportunity. And if valuations remain speculative and volatile, we cannot expect acceptance in emerging markets.

What is needed both within and outside the digital asset industry is a focus on functionality.

This means that companies conduct transactions using digital assets. That means infrastructures like payment rails that house digital assets. And that means people, where they can, vote for sensible regulations to help create environments that support digital assets.

The digital age presents an unprecedented opportunity to expand financial inclusion and security. The tragedy will be if we miss the opportunity to nurture this emerging – or shall we say high potential – population while the cost of doing so is falling as digital infrastructure expands.


The author is Head of Research and StrategyAAX.

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