One of the latest trends for cryptocurrency and blockchain developers is making projects aimed at so-called developing countries. Limited access to the traditional banking system makes these markets favourable for the further development of various blockchain projects, which could improve conditions of life for many people there.
Blockchain Hype or Economic Necessity?
To be clear, by “Developing Countries” we mean any country outside of the International Monetary Fund (IMF) classed as Advanced Economies (e.g. North America, Australia, Japan, Europe, and Scandinavia).
Quite often, these “Developing Countries” are achieving more breakthroughs with far fewer resources. From South Africa to Venezuela and Indonesia, cryptocurrencies have already made an impact. For the unbanked or underbanked, putting their cash into crypto is a way to invest and realize gains which they would not have had otherwise, regardless of whatever else is happening in their local economy.
For governments, the use of a nationalized cryptocurrency and various blockchain-based public services can help reduce overall administrative costs, reduce fraud and establish independence to the need to price in USD, EUR or JPY equivalents.
Economics of Developing Countries
Cryptocurrencies and blockchain technologies can help “Newly Industrialized Economies”, which are establishing international trade to expand necessary imports and export both natural resources and goods in several key areas:
- Retail and Business Banking transactions – moving towards cryptocurrencies can help to reduce the need to mint coins and notes, track these and of course eliminate the fraud associated with it. From Dubai to Slovenia, many cities are looking to run completely on cryptocurrencies.
- Digital Signature of Documents, Proof of Residency and Work permission – Estonia’s Estcoin may have been one of the first cryptos targeting blockchain technology in an e-Residency design, which tracks non-resident information and makes it easy for foreigners to establish businesses through blockchain technology. For many poor people, this could simplify the distribution of subsidies, proof of identity and work permission at home or abroad. Blockchain technology could also help those displaced by natural disasters, economic failure or war.
- International Trade. There are two key areas to consider here: Customs & Tracking information, and International Payment & Settlement. Blockchain technologies provide a secure, encrypted mechanism to track information relating to shipments. Customs taxation on these can be tracked more smoothly than through the mountains of paperwork.
Developing Countries have an opportunity to lead blockchain initiatives to fuel their own growth, reduce fraud, tax evasion and increase transparency of international trading. Venezuela’s hyperinflation crisis and subsequent implementation prove that simply “launching” a crypto does not guarantee success.