Cryptocurrency Adoption in Emerging Markets: Opportunities and Challenges

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INTRODUCTION

The emergence of Cryptocurrency has been welcomed in developing countries since this has the capacity to satisfy the needs that have been ignored by the conventional financial services. Due to the low level of banking services provision and the high costs of transactions, there exists an alternative in the form of cryptocurrencies that can reach out to the many unbanked people. This transition is becoming more evident as emerging economies have a need to process financial transactions much of the faster, cheaper and more visibly.

Hyperinflation and unstable currencies in most of the emerging markets have made it common for people and enterprises to turn to cryptocurrency as a protection from the devaluation of their national currency. With Bitcoin and other similar digital assets, one can find a good store of value that is not affected by increasing prices. Also, due to the nature of blockchain which defies the risk of concealment and alteration in the way operations are conducted, makes such regions that have high levels of corruption or weak governance a good market for the technology.

Nevertheless, even with these prospects, the uptake of the cryptocurrency in the emerging markets remains difficult. Factors such as regulatory uncertainty, lack of hardware and or basic infrastructural support and ignorance are major roadblocks. The dynamic nature of cryptocurrency means that most governments would be able to respond to assumptions on regulatory enfo

• OPPORTUNITIES FOR FINANCIAL INCLUSION:

One of the features that attract many to cryptocurrency in developing countries is financial integration. In several countries, a significant part of the populace is unable to access certain fundamental banking systems. Cryptocurrencies seek to eliminate the need for banks by proving a decentralized financial structure that can be used by anyone with a mobile phone. This has enabled people to secure, transfer and receive money without having a bank.

Cryptocurrency also facilitates transactions between users directly, without any middlemen like banks, hence, lower costs involved in such transactions. This is useful in transactions of this kind especially remittance since traditional ways of sending money overseas cost too much. Thanks to cryptocurrencies, people can send money to any part of the world within minutes at a very low cost which is a great boost to the financial inclusion of poor people.

Owning this kind of currency enables people from places with fragile banking systems to access a better working system. It enhances foreign trade and new markets for the entrepreneurs and small businesses in the developing countries without totally depending on the local currencies.

• IMPLEMENTING STRATEGIES TO COMBAT INFLATION:

In hyperinflation-prone emerging markets, cryptocurrency-based store of value emerges as a logical alternative. For instance, economically depressed countries like Venezuela and Zimbabwe see citizens hoarding bitcoin when the local currency loses its value. Unlike traditional cash which can be affected by political events and other forms of economic instability, cryptocurrencies are free from any formed politics, hence suitable for containment of value.

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Countries do not issue the digital currencies and hence people are able to put aside a large amount of money in a format which is not typically volatile. This helps in buying foreign currency or investing in foreign stock market when such conditions prevail. Hence the people residing in such areas can protect themselves against the economic factors as well as maintain their standards of living without fear of currency devaluation.

For this reason, the concept of ‘borderlessness’ in cryptocurrencies gives agencies to the individuals to shift their assets in more secure and appropriate places without any restriction. Nevertheless, this feature of digital assets saves the individuals’ wealth from the negative effects of the currency volatility in developing nations and serves as a way out during difficult economic situations.

• REGULATORY AND INFRASTRUCTURE CHALLENGES

The usage of cryptocurrency in emerging economies still faces regulatory and infrastructure changes, despite its promise. Most of these governments are on the fence when it comes to determining the nature of the regulation of cryptocurrencies, leaving businesses and individuals who want to trade in them in limbo. Some countries have gone to the extent of laying total bans on the use of cryptocurrencies as there are fears of undermining the existing financial arrangements.

Similarly, lack of clear regulations affects the functioning of cryptocurrency exchanges restricting them from being fully functioning institutions. In the absence of certain legal provisions, it becomes hard for many exchanges to get licenses, to adhere to the standards and policies, and to keep the users’ money safe. This makes hard entry to intending users and increases the level of fraud and scam.

Another major obstacle is that the infrastructure required to use cryptocurrency on a large scale is very often absent in emerging markets. Each of these places has a baseline, namely Internet coverage, level of awareness and development of the technology, all of which impede the people from being active participants in cryptocurrencies. This calls for both the governments and the private sector to take up the challenge and upraise the infrastructural bases in order to cope with adoption.

• AWARENESS AND EDUCATION GAPS

The lack of awareness and education is yet another setback in cryptocurrency usage in emerging markets. Many of the people in these regions do not understand digital currencies and are hesitant in their adoption. The competitive environment that surrounds cryptos and the blockchain is geographical, meaning that, in these regions where there is limited knowledge of finance and technology, it is usually hard for such languages to be elicited.

However, in order to achieve that goal, educational efforts will be required. As appropriate information is lacking, people will fall into tricks of con artists, gibbers, and digital assets abuse. Therefore, the government, NGOs and private sector can improve the situation through financial education and promoting the idea of cryptocurrency.

Such educational and advertising measures which stress lower transaction costs, faster payment and overall safety of the currency can address the objection to the currency. Additionally, teaching the users how to use it(correctly) and how to avoid making mistakes with it will encourage more people into the digital economy.

CONCLUSION

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The adoption of cryptocurrency in emerging market economies reveals both immense prospects and enormous risks. Digital currency helps to boost the level of the population and businesses included in formal finance systems which otherwise may be weak or non-existent in particular areas by enhancing financial access, acting as a protection against rising costs, and providing non-traditional financial services.

Nevertheless, issues such as regulatory ambiguity, lack of the appropriate infrastructure, and expectation for a degree of learning still remain major barriers for widespread traction. To overcome these setbacks, there will need to be a partnership between the government, the business world, and the international community to foster the cryptocurrency ecosystem in the developing world.