Think of it like trying to build a house on moving sand. That’s what it’s like just to create build the financial future in so many of today developing economies. Currency devaluation, rampant inflation, lack of access to banking – these are the realities that their constituents live day to day, not just high-minded economic concepts. For years, Bitcoin was heralded as a great escape hatch. Its dramatic price fluctuations resembled a theme park coaster more than a safety net. Now, with Bitcoin experiencing a period of relative calm, a crucial question arises: Can this newfound stability unlock its potential to address real-world economic needs?
Can Bitcoin Really Help the Poor?
Bitcoin, in its utopian version, does indeed hold the potential for a borderless, decentralized financial system. In Accra, where I’m now based, and across most of the African continent, that promise lands like a slap in the face. Consider the mom and pop store owner, unable to accept international payments for his or her products because of outrageous banking fees. Or a household using remittances, sending most of the money earned at great cost elsewhere. Bitcoin has the potential to provide a stronger, more efficient, more affordable option.
Let's be honest: the narrative of Bitcoin as a savior for the unbanked has always been complicated by its volatility. A 20% increase in price would erase more than one month’s savings. How can we expect those whose lives are precarious, who dwell on the edge, to adopt such absurd risk-inclined postures?
This is why the fourth quarter’s golden age of low volatility is particularly interesting. A more stable Bitcoin could make it a viable tool for:
- Everyday transactions: Imagine using Bitcoin to buy groceries without worrying about its value plummeting overnight.
- Long-term savings: A less volatile Bitcoin could serve as a hedge against inflation in countries with unstable currencies.
- Cross-border payments: Bitcoin could facilitate faster and cheaper remittances, putting more money in the hands of those who need it most.
We have seen examples of this already. In other countries, such as El Salvador, Bitcoin has been a key instrument in simplifying cross-border payments. It offers financial services to the unbanked in a largely debated mechanism, which is cash app. Bitcoin adoption by small businesses is increasing their independence from old guard financial institutions. The secret sauce necessary for broader adoption isn’t technology, it’s trust. Trust requires stability.
Is the Calm Before the Storm?
Let's not get carried away. The current sideways trading range, as some analysts have pointed out, might be a temporary lull before another surge of volatility. At risk of oversimplifying, the market is pretty much in equilibrium — balanced buying and selling pressure. This equilibrium is fragile. The “swing failure” at the 2023 high suggests there’s some deep-seated bearish conviction. The conditions of low volatility may be setting up “trap setups” – fakeouts and liquidation runs engineered purposefully to prey on uneducated and naive traders.
This absence of regulatory oversight is particularly troubling in developing countries where financial literacy is regularly at a deficit. With great opportunities come great risks. The potential for new scams and fraud is equally as promising. We need to ask ourselves: are we truly empowering people, or are we simply exposing them to new forms of exploitation?
The answer, I hope, lies in responsible regulation and education. It is up to governments and international organizations to collaborate in establishing a regulatory framework that encourages innovation while still ensuring the safety of consumers. This framework should:
- Promote transparency and accountability.
- Provide clear guidelines for Bitcoin businesses.
- Educate consumers about the risks and benefits of Bitcoin.
Anxiety/Fear: Experts warn of impending economic crisis if regulations are not put in place.
Can Bitcoin Grow Up Responsibly?
Bitcoin’s path from the world’s first decentralized digital currency to a possible vehicle for U.S. economic development is just beginning. Today we find ourselves in a world of historically low volatility. That creates a rare opportunity to tap into its potential responsibly and sustainably.
Let's be clear: Bitcoin is not a magic bullet. It’s a valuable tool in that regard, but like any tool, it can be used for good purposes or for ill. The important thing is how it’s used—in a manner that most helps our most vulnerable citizens.
It’s imperative that we get policies right so that we expand financial inclusion and economic opportunity while ensuring protections for our most vulnerable populations. The answer is not to ban it — but rather, we should invest in education and awareness campaigns to ensure everyday people understand the risks and benefits of Bitcoin. We need to create a culture of responsible innovation that puts the community first.
Bitcoin’s success in developing economies depends on whether we can actually provide freedom. Yet at the same time, we need to be maintaining continuity and safety. It’s a delicate balancing act, and the stakes could not be higher. The financial inclusion of a generation will be determined based on our success in this respect.
The potential for Bitcoin to contribute to sustainable economic development in developing countries is truly inspiring.
