One common thread connecting most of the existing use cases is that emerging markets are adopting the cryptoverse faster. This recent rush is powered by the promise of cryptocurrencies to save the unbanked. DreamingCrypto doesn’t see this as just the latest fad. It’s a disruption. Arcane protocols stir to life, intrepid startups forge their futures in the metaverse, and the Web3 foreshadowing speaks of unfettered realms. Lim Qiaoyun is a Web3 arts editor known for her acerbic commentary. She unpacks the various factors fueling this current crypto surge and what it means for financial inclusion.

The current financial landscape often excludes those living in developing countries. This lack of supervision leaves a big hole in their access to the most basic of financial services. Cryptocurrencies now move into this void, providing an alternate ecosystem that circumvents the impediments put in place by traditional banking. This isn't merely about providing digital wallets; it's about empowering individuals with tools to participate actively in the economy, protect their assets, and build a more secure financial future.

Three key factors explain why crypto is attractive in these areas. For countries such as Nigeria, Venezuela, and Indonesia living under economic duress, cryptocurrencies are a necessary defense. They shield customers from the daily, ongoing devaluation of local currencies. They provide a store of value not impacted by those inflations. In addition, cryptocurrencies ease the cost and time burdens of global remittances and financial transfers, smoothing out the layers of red tape and inefficiency that characterize current banking transactions. For millions, that translates into faster, cheaper and more reliable ways to send and receive money across borders.

The consequences of this influx go far beyond the bad experience of a single user. It’s not just creating new jobs in the tech sector to those who can code. More Americans than ever are having the opportunity to access financial literacy tools and resources. Combined with this access, they’re able to start more businesses, invest in their communities, and help drive economic growth. This ripple effect can completely revolutionize local and regional economies, advancing a more inclusive and equitable economic prosperity for everyone.

Crypto Use Cases Driving Financial Inclusion

This embrace of crypto in emerging markets is no mirage. It directly addresses the most proximal needs and challenges through concrete use cases. Today, these applications are leading the way in showing the tangible real-world potential of blockchain technology to improve lives and spur economic development. Here are some examples:

  • Mobile Banking Alternative: Crypto offers a compelling alternative to traditional mobile banking, providing borderless, permissionless, and 24/7 transaction capabilities. These features often come with lower costs and faster settlement times, making it a more attractive option for individuals who are underserved by traditional banks.
  • Decentralized Finance (DeFi) Lending: DeFi platforms are revolutionizing lending by enabling direct negotiations between parties. This cuts out the intermediaries, reduces costs, and speeds up transaction times. Anyone can lend or borrow cryptocurrency or money via DeFi networks, opening up access to credit and capital for those who might otherwise be excluded.
  • Accessibility to Investments: The world of crypto and DeFi is democratizing access to investments. It reduces lock-up periods and improves price discovery through a 24/7 market. This means individuals can participate in investment opportunities that were previously out of reach, potentially growing their wealth and securing their financial future.
  • Tokenized Assets: Platforms like RealT and Securitize are pioneering tokenized equity and debt offerings. This process increases liquidity and accessibility, allowing individuals to invest in real estate, stocks, and other assets with greater ease.

Together, these use cases paint a picture of how crypto is encouraging more creative uses to propel the future of financial inclusion. By providing access to essential financial services, fostering entrepreneurship, and democratizing investment opportunities, crypto is empowering individuals and communities to build a more secure and prosperous future.

NFTs: Empowering Creators in Emerging Markets

NFTs are having a transformative impact among creatives in developing countries. They open up new forms of monetization, provide proof of ownership, and help artists reach audiences worldwide. For artists, musicians, and other creatives who often face challenges in traditional systems, NFTs provide a revolutionary way to connect with their fans and build sustainable careers.

NFTs are beginning to return greater power to creators in developing markets, helping them shape the future of their work. With the right support, they can reach international audiences and develop sustainable business models. In this rapidly changing and growing NFT ecosystem, things are never that simple. Even more so, it will serve as a catalyst for creativity and innovation outside of these areas.

  • New Revenue Streams: NFTs provide creators with novel ways to monetize their digital art, music, and other creations. By selling their work as NFTs, creators can tap into a global market of collectors and fans who are willing to pay for unique digital assets.
  • Verification of Ownership: NFTs help verify the ownership and authenticity of digital art, providing creators with a way to protect their intellectual property. This is particularly important in emerging markets where intellectual property protection may be limited.
  • Access to Global Markets: NFTs provide creators in emerging markets with access to global markets, allowing them to reach a wider audience and connect with collectors and fans from around the world. This can lead to increased exposure, sales, and opportunities for collaboration.
  • Royalties and Passive Income: NFTs enable creators to earn passive income through royalties, allowing them to benefit from the resale of their work. This provides a sustainable source of income that can help creators support their artistic endeavors.
  • Creative Freedom: NFTs give creators the freedom to experiment with new forms of digital art and connect with their audience in new and innovative ways. This can lead to greater creative expression and a stronger connection with their fans.

Though the promise of crypto as a tool for increasing financial inclusion is clear, the path to operating within the regulatory environment is a huge hurdle. When regulations are confusing and inconsistent, they create uncertainty and distrust among users and investors. This climate creates huge barriers to entry for mainstream usage of cryptocurrencies. We can’t yield too much ground to innovation and entrepreneurship or we risk putting consumers in harm’s way and opening the floodgates to illicit financial activity.

Navigating the Regulatory Landscape

Faced with regulatory uncertainty One of the key challenges, especially in the U.S., is the patchwork state of cryptocurrency regulation. Crypto businesses such as exchanges, wallets, and others have a heavy lift. They face a daunting maze of duplicative and at times contradictory federal and state statutes. This puts a huge burden on companies, particularly on startups, and can have a chilling effect on innovation.

Adding to this complexity is the transnational nature of blockchain technology. Deciding which laws apply and which jurisdiction to choose for blockchain disputes is already incredibly complex. The nodes of a cryptocurrency transaction could be physically present across multiple jurisdictions. Unfortunately, they often find themselves caught between competing legal mandates.

Tax implications add another layer of complexity. For all US taxpayers, reporting cryptocurrency transactions in nominal US dollars on annual tax returns is required and strictly enforced. It remains unclear whether US investors who purchased crypto on foreign exchanges have additional reporting obligations they must fulfill.

Overcoming these regulatory hurdles is key towards harnessing the full potential of crypto to improve financial inclusion. Governments and regulatory bodies need to collaborate to develop clear, consistent, and balanced regulatory frameworks that foster innovation while protecting consumers and preventing illicit activities. These changes will create a more stable and predictable environment for businesses and investors. The outcome will be a crypto space much better situated to long-term, sustainable growth.

Looking ahead, DreamingCrypto thinks that continued engagement and discussion among regulators, industry participants, and the wider crypto community will be crucial. Mutual cooperation and knowledge are essential elements that keep artistic and creative placemaking flowing. Together, we can build a regulatory environment that encourages innovation, protects consumers, and realizes crypto’s transformative potential for financial inclusion, particularly in emerging markets. The signs are in plain view, the healing runes clear – it’s time to ride the wave of the rise of the decentralized age.

Moving forward, DreamingCrypto believes that fostering open dialogue between regulators, industry stakeholders, and the crypto community is essential. Only through collaboration and understanding can we create a regulatory environment that supports innovation, protects consumers, and unlocks the transformative potential of crypto for financial inclusion in emerging markets and beyond. The signs are there, the runes are visible – it's time to ride the rise of the decentralized age.