Although institutional adoption remains on the rise, in major economies such as the United States, cryptocurrencies continue to be viewed as a highly speculative asset class. However, in the world’s emerging markets, adoption of cryptocurrency has been driven more strongly by necessity rather than speculative frenzy.
Blockchain technology has been a game-changer for the world’s underbanked, who prior to the emergence of the Web3 economy, were underserved by the traditional financial system. With this, it’s no surprise that the countries most rapidly adopting cryptocurrencies for everyday use are primarily those in the developing world.
Crypto industry leaders like Binance have been investing heavily in solving the globally unbanked problem for several years. After re-entering the Indian cryptocurrency market last year, Binance is in the process of entering other emerging markets where cryptocurrency use is on the rise and there’s a significant need for financial services. In a recent fireside chat at the Token2049 conference, Binance CEO Richard Teng explained his vision for global financial meritocracy, “At Binance, we’re breaking barriers to empower the 1.7 billion unbanked worldwide through intuitive tools, regulatory collaboration, and open access. Financial freedom shouldn’t be a privilege.”
If other such institutions and investors follow suit, it could create an outcome that both produces positive financial returns, while at the same time fostering a continued increase in financial inclusion.
Crypto: Banking the Unbanked
In the United States, cryptocurrencies have entered the financial mainstream over the past year. The launch of products like spot Bitcoin exchange-traded funds (ETFs) have led to an inflow of institutional and retail capital into this asset class.
However, when it comes to adoption of crypto outside the U.S. and other developed economies, the focus is less about investment, and more about functional use. For one, in emerging markets, cryptocurrencies have emerged as a solution to a longstanding problem: limited access to banking. Per the World Bank, around 1.7 billion of the world’s population remains unbanked, or without access to essential banking services.
But while this figure remains astonishingly high, rising access to crypto-based alternatives to traditional personal and business banking products has helped to mitigate this issue. It’s no coincidence that Indonesia, Nigeria, the Philippines and Vietnam, four of the top ten countries on the Global Crypto Adoption Index, are also some of the most underbanked countries in the world.
That’s not all. Through crypto stablecoins like USDT, those in emerging markets now have access to both a hedge against local hyperinflation, as well as a faster and less expense means to conduct cross-border transactions.
‘Regulatory Clarity’ as a Global Phenomenon
Since 2024, there’s been increased discussion regarding “regulatory clarity,” or the implementation of regulatory frameworks that enable the blockchain economy to integrate fully with the mainstream financial system.
Yet while much of this “regulatory clarity” talk has been about recent and anticipated future changes in U.S. cryptocurrency regulations, it should be noted that “regulatory clarity” is indeed a global phenomenon. Per a recent study from the Atlantic Council of 60 countries, including both those with advanced as well as emerging market economies, 70% of them are currently making substantial changes to their regulatory framework.
As these changes are by-and-large accommodative to industry growth, standardization of crypto regulation worldwide stands to further open up access and availability to crypto-based financial services in emerging markets. The high amount of underbanked and unbanked populations in these markets points to strong demand for crypto-related services.
But while some forward-thinking institutions have started to take notice, awareness of this fact is still far from widespread. As a result, it may be underinvestment, not a lack of demand or “regulatory clarity,” that is limiting crypto’s potential to increase financial inclusion.
Increased Emerging Market Crypto Investment Could Create a Win-Win for the Industry and the World
Crypto and blockchain venture capital (VC) investment continues to skew heavily towards startups based in the United States and other advanced economies. In emerging markets, crypto-based startups face greater challenges securing growth capital.
Again, while some firms have started to see the opportunity here, greater awareness, and in turn greater investment, is likely necessary for this trend to continue, if not accelerate in pace. While there may be hesitancy among mainstream venture capital investors to invest in emerging markets, due to various jurisdictional-related risks, high demand for such services may provide sufficient potential reward to outweigh these risks.
If VC firms and other investors increase their focus on emerging market startups, it may just well produce a “win-win” scenario for both parties. Investments in emerging market crypto ventures could experience rapid growth, thanks to a high potential customer base of underbanked and unbanked customers.
The underbanked and unbanked, in turn, stand to benefit from increased financial inclusion, including greater access to the global market, which could help drive economic growth in their respective countries.
Readers are advised that Crypto products and NFTs are unregulated and involve significant risks. There may be no regulatory recourse for losses arising from such transactions.
Hindustan Times/HTDS shall not, in any manner, be responsible or liable for the content of the article, advertisement, including the views, opinions, announcements, declarations, or affirmations expressed therein and is absolved from any legal action or enforceable claims. This content is for informational and awareness purposes only and does not constitute financial advice.
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