How Blockchain & Cryptocurrencies Transform Emerging Markets - Defiway
The Role of Blockchain and Cryptocurrencies in Emerging Markets photo
By: Natali

The Role of Blockchain and Cryptocurrencies in Emerging Markets

Table of Contents

Emerging markets, also known as developing or growth markets, are countries in the process of rapid urbanization, growth, and socio-political transformation. They are not so tied by regulations as developed markets like the USA, Canada, or West Europe. Thus, they have more freedom to implement new technologies such as blockchain into the local economies.

Rapid urbanization speeds up adoption processes, including cryptocurrency. In rural areas people often barter things, but they can’t do it in the city because they have fewer things to trade while having access to increased consumer markets.

And for many reasons, not everyone in developing countries can get a bank account. But they still need to store and save their money securely, without fear that intruders will break into the house and steal all their money. Eventually, people in those countries start to look for ways to store and spend money digitally. And the most accessible way to do it is by using cryptocurrencies.

But how does cryptocurrency affect the economy of developing countries? In this article, I want to show you how blockchain technology will help people in growth markets to live their best lives.

What are Blockchain and Cryptocurrencies?

Blockchain is the technology that allows computers to connect in a decentralized way without a centralized server or authority. The most well-known sub-technology is cryptocurrencies. They are tokens in the distributed ledger network. Users can exchange them at predetermined rates. This technology opens new ways of financial inclusion, allowing people to participate in local and global economies. Many people choose stablecoins to store and exchange money in the safest possible manner. Stablecoins prices are pegged to another fiat or cryptocurrency, commodity, or financial instrument.

People from emerging countries often emigrate to developed economies to earn decent money, so they can send it to relatives. And remittance flows are costly and slow in many countries. Blockchain-based solutions can facilitate faster and more affordable cross-border transactions, reducing fees and improving the efficiency of remittance processes. One of the main benefits of blockchain technology is easier access to capital management for unprotected population segments. New technologies will ease capital access. Traditional financing options often are limited in emerging markets, providing financial services only to the wealthiest in the community.

Blockchain opens access to global capital to everyone who has basic technology skills. Blockchain-based crowdfunding platforms, such as Initial Coin Offerings (ICOs) and Security Token Offerings (STOs), provide financing for startups. Emerging markets also often face issues related to supply chain inefficiencies, counterfeit products, and lack of traceability. Blockchain can solve this problem by providing transparent and secure platforms for supply chain management. A strong desire for industry standardization will give us tools to exchange data between various businesses within seconds. It helps to ensure the authenticity of products, reduce fraud, and improve overall efficiency.

Another common problem in developing countries is corruption and lack of transparency. So how will blockchain change the world and make it a more fair place? It’s impossible to hide information in the blockchain. This technology will improve governance since the electorate will see how politicians vote for different regulations. This technology also helps mitigate corruption by providing a tamper-proof and auditable transaction record. Speaking of transparency, blockchain will secure property rights in developing countries. In some emerging markets, property ownership papers may be poorly documented. Blockchain will establish secure and immutable property registries, reducing disputes. More people will overcome the fear of buying and leasing properties, boosting the economy to new heights.

Blockchain and Cryptocurrencies in the Financial Landscape

Blockchain and cryptocurrencies revolutionize the financial industry. Decentralized technologies have the potential to streamline financial processes by eliminating intermediaries and reducing paperwork. There are no intermediaries, which lower transaction costs, fasten settlement times, and enhance overall operational efficiency.

Cryptocurrencies have the potential to open decentralized finance opportunities and provide genuine financial inclusion to the market. Many people in developing countries are unbanked, so they have to use cash. Blockchain is changing everything! With just a smartphone and internet access, people can participate in the global financial system, borrow and lend money, supporting the economy. The most famous decentralized exchanges are Uniswap, Kine Protocol, and DydX. People can build wealth or borrow digital money on lending platforms like Compound, Binance, and Aave.

Many people look for accessible stablecoins to start their crypto journey. Some central banks of developed countries understand the potential of crypto, so they have decided to create their cryptocurrencies (CBDC). Those coins fast as other cryptocurrencies, yet fully legal inside the country since they are being issued and regulated by central authorities. The most well-known examples are the Digital Rupee by the Reserve Bank of India and the Dollar by the Central Bank of the Bahamas. Moreover, there are CBDC projects in Europe! The National Bank of Ukraine is slowly but surely creating the digital form of their national currency - e-hryvnia.

Blockchain also allows tokenizing of online and physical assets, including fine art, real estate, and other commodities. When a client buys a good, the seller can provide not only the item but its digital token. It proves the item's origin and provenance. So when they decide to sell this item, they can provide the token as immutable proof of the item's origins.

Understanding Emerging Markets

As I told you before, the other name for emerging markets is “developing economies”. This naming refers to the countries and regions facing rapid industrialization, economic growth, and integration into the global economy. All emerging markets have multiple distinctive features that unite them. They all have rapid urbanization since more and more people move from rural areas with agronomic economies to cities with service economies. It provides new opportunities that form the middle class.

In the poorest countries, there is no middle class. There are very few ultra-rich people and millions of the poorest communities. Urbanization and economic growth provide more opportunities to grow, building a middle class that multiple owns homes and cars in one family. So emerging markets have the potential to attract more internal and external investment opportunities. But behind every single lining, there is a cloud. Developing countries still lack government efficiency and often face corruption. Establishing transparent governance structures is crucial for long-term economic growth and attracting foreign investments. Also, blockchain can provide unlimited access to information and open new e-commerce, communication, and governance opportunities. It will give support to local startups and small businesses and boost the local communities by helping them provide crucial services to those who need them.

The Importance of Blockchain and Cryptocurrencies in Emerging Markets

So, how does cryptocurrency affect the economy of developing countries? As I said, blockchain provides various solutions to troubleshoot the biggest challenges of emerging markets. It will provide financial services to unbanked and underbanked populations. Unfortunately, business and property loans in developing countries are accessible only to the richest in the community.

Cryptocurrency opens this opportunity to everyone with a fine level of financial awareness. With a smartphone and internet access, individuals can access digital wallets, make peer-to-peer transactions, and store, lend, and borrow securely. It opens new ways to save, invest and earn money. Digital currencies also will play a crucial role in remittances. Many families in developed countries rely on relatives living abroad. Traditional international finance channels are slow. Blockchain can speed up and cheapen this process.

This technology also can level up property rights and regulation transparency. Blockchain can establish immutable registers that can write any information: from property registry and investments to the governor's voices in the local and country government.

The Role of Defiway in Emerging Markets

Defiway has multiple services that will be handy for people from developing countries. And first and most commonly used is the Wallet available as a mobile app or web service. It’s a non-custodial wallet with built-in exchange and a secure cross-chain bridge. You can use it online, so it acts like a hot wallet, while in reality your coins are held in remote cold storage. That means next: no one can access your wallet remotely. It also supports 2FA and PIN-code fingerprint support for additional protection. You can also set limits per day/week to minimize theft risks even more.

Wallet and other Defiway services support most common networks, such as Bitcoin, Ethereum, BNB Chain, zkSync era, Polygon, Kava, Tron, Fantom, Pulse Chain, Cronos, Avalanche, Optimism, and Arbitrum. You can set up a joint account for your friend or relatives group to send and receive digital currencies.

Payroll services untie the hands of freelance workers from developing countries. They no longer need to research what international payment services such as PayPal or Payoneer work in their region. They don’t need to adapt to bank working hours to accept their Western Union transfer. You’ll get access to the quick transfer available at any part of the day (and even at night). Let’s imagine that you are a freelancer from Seoul and have just done a great illustration for an LA-based client. It's 10 a.m. in California and 2 a.m. in South Korea. And if your client sent you a SWIFT transfer or used any traditional service, you mostly should wait for the 9-10 a.m. in Korea. But what if you need it right now? With cryptocurrencies, your approximate waiting time will be within 5-40 minutes (depending on the network). Employers can set up a unique payment algorithm in the PayRoll, so every staff gets their salary in time. Defiway’s PayRoll tool has integration with Time and Attendance, ERP systems, and expense management systems.

Defiway Pay service allows businesses to start accepting crypto payments within a few clicks. It can scale up its market presence both online and offline. It has a custom plugin that allows with most CMS, and our developers help you to integrate the tool if you have a unique self-written system.

With Defiway Pay your customers don’t need to provide sensitive payment information. And it goes hand in hand with the latest KYC requirements. You can use it in the gaming industry, e-commerce, as a donation service for your blog, and more.

Defiway Bridge service provides a safe and fast way to exchange your coins from one network to another. In most bridges, you need to sign multiple smart contracts (at least 2) that provide criminals with more vulnerabilities to hack. In Defiway Bridge there is only one smart contract that streamlines Send transactions. It drastically eliminates the hacking possibility.

Forecasting the Future

If you are still curious about how blockchain will change the world, I have answers for you. I see the future of emerging economies as prospering. Eventually, each country will become a part of the global economy. For some, it can take only 3-5 years, while other countries may take 10-20 years. But in the end, everyone becomes connected. And blockchain will be an integral part of it.

As you see from this article, this technology will take a leading role to boost international financial communication and standardize crucial tech-related society parts. But before it, we will see many privacy concerns and regulatory challenges. It’s vital to set guidelines that will be similar at least to the chosen region. So, governments must find a balance between their local and regional laws, between foresting innovation and preventing risks.

We already see how developed countries implement multi-national crypto regulation (let’s take the European FATF as an example). And we will see similar regulatory bodies in emerging markets. Another industry challenge is infrastructure limitations. Developing countries don’t have that much digital infrastructure. Some states still have limited smartphone access, inadequate internet connection, and power supply issues. Those societies need to overcome those challenges if they want to use blockchain in its full power. And digital education will help them with it.

Blockchain is still a new concept to many people. And blockchain-related companies need to raise awareness of their potential users by showing the benefits of blockchain technology. It will naturally increase adoption to new levels. So, we will see more and more international partnerships and unexpected collaborations. They can provide tailored solutions to local communities, beating up all challenges and leveraging existing networks.

Final Observations

Developing markets face many problems: rapid urbanization, corruption, and under the banking of low-class citizens. And blockchain can solve those issues with ease. This technology will help build a secure and transparent governance structure, ease supply chain management, and provide tools that help people attain a society with financial inclusion. Even people from a lower class will be able to work internationally, borrow and lend money. It will help them build their wealth, and increase the number of middle-class people in this society.

Many central banks will choose to create their digital currency. We already see BitPesa, Digital Rupee, and E-Hryvnia. And it’s just the beginning. We will see even more stablecoins from central authorities. In the next few years, we will see how new blockchain businesses change the regulatory landscape by making it more digital-friendly. They will slowly but surely break the infrastructure limitations making new technologies more accessible. Digital education and crypto awareness will help to build new clusters of the economy, where even people from the poorest communities will have a chance to achieve a prosperous and abundant future for their loved ones. If you want to understand how blockchain and crypto can change your life, subscribe to Defiway socials and add our web blog to your bookmarks to find useful tips and tools to build your wealth!