How Cryptocurrencies Are Boosting Financial Inclusion Worldwide

Financial inclusion is a key driver of economic growth, ensuring access to banking and financial services for everyone. Today, over 1.4 billion people worldwide are unbanked, including those in rural areas, migrant workers, developing countries, and those working in the informal economy.

Cryptocurrencies and blockchain technology provide innovative solutions to bridge this gap. With their decentralization, transparency, and global accessibility, cryptocurrencies can become a powerful tool for reducing economic inequality.

Financial Inclusion: Challenges of Traditional Systems

The financial system, designed to promote economic equality, often remains inaccessible to many people. Here are the main barriers to financial inclusion.

Geographical Inaccessibility

In many countries, banking infrastructure is concentrated in urban centers, leaving rural areas without access to financial services. For example, in the Democratic Republic of Congo and Nepal, most people live in rural communities with no financial institutions nearby. This forces them to travel long distances, sometimes hundreds of kilometers, to reach the nearest bank.

In contrast, cryptocurrencies solve this issue, as creating a crypto wallet only requires a smartphone and internet access. This enables financial participation even in the most remote locations worldwide.

High Fees

Traditional international money transfer services like Western Union and MoneyGram charge high fees, often ranging from 10% to 20% of the transfer amount. For migrant workers sending money to their families, these fees result in significant losses, especially on smaller transactions. 

For example, a migrant worker sending $200 could lose up to $40 in fees, which is a significant cost for low-income families. Cryptocurrencies, particularly stablecoins, offer low transaction fees, allowing users to keep more of their earnings.

Bureaucratic Barriers

Bureaucratic requirements for opening bank accounts often create significant obstacles for people in low-income countries. In Pakistan, for example, over 90% of women remain unbanked due to complex documentation requirements such as ID cards, proof of income, and proof of address. For those working in the informal economy, meeting these requirements is extremely difficult. 

Cryptocurrencies offer a solution by eliminating the need for traditional documentation (except when using crypto exchanges that require KYC verification). Creating a crypto wallet is simple and unrestricted by gender, income, or citizenship, making financial services accessible to everyone.

Corruption and Lack of Trust

In countries with high corruption levels, banks are often misused for money laundering, illegal transactions, or embezzling citizens' savings. 

In Venezuela, for example, hyperinflation and political instability have caused a massive devaluation of the national currency. Many people have lost their savings due to uncontrolled inflation or corrupt financial practices. 

Cryptocurrencies provide a solution through decentralization and blockchain transparency.

Since all transactions are recorded on a public ledger, the risk of fraud is significantly reduced.

Additionally, some cryptocurrencies offer better protection against inflation, helping people preserve their wealth regardless of economic instability.

Related: Inflation’s Role in BTC Price Movements

How Cryptocurrencies Solve These Problems

Unlike traditional banking systems, cryptocurrencies provide a new approach to financial transactions. They are decentralized, widely accessible, and less vulnerable to government restrictions.

We’ll explain how this works in more detail below.

Accessibility for Everyone

Cryptocurrencies operate on a decentralized system, eliminating the need for banks or traditional financial institutions. Anyone can create a crypto wallet within minutes, even in remote areas without banking infrastructure or where traditional financial services are inaccessible. 

For example, in Kenya, the platform BitPesa enables international money transfers using cryptocurrencies, which has become especially beneficial for farmers. They can receive payments from international buyers directly on their smartphones, avoiding bureaucratic red tape and complex banking processes.

Related: The Crypto Garden: How Blockchain Changes the Agriculture

Low Transaction Fees

Cryptocurrencies offer the advantage of low transaction fees, regardless of the amount or distance between the sender and receiver. For example, in 2021, a $1 billion transaction on the Bitcoin network cost just $0.68! 

In countries like the Philippines, cryptocurrencies are popular among migrant workers who send money to their families. By using crypto, they avoid high fees charged by banks and money transfer services like Western Union.

Related: How Tron Transaction Fees Work and How to Reduce Them

Transparency and Security

Blockchain technology records all transactions on a public ledger that cannot be altered or tampered with. This makes cryptocurrencies an effective tool for fighting corruption, as it reduces the risk of fraud and manipulation.

For example, in Bangladesh, blockchain is used to distribute humanitarian aid, ensuring transparency and making sure that aid reaches those in need without getting lost in corruption schemes.

Decentralization

Cryptocurrencies are not controlled by any government or central authority, which makes them less vulnerable to economic crises and inflation. In countries with unstable economies like Venezuela, where inflation has reached record highs, people are increasingly turning to Bitcoin as a store of value. By using cryptocurrencies, they can protect their savings from a rapid devaluation of the local currency, providing a financial lifeline for millions of people.

Cryptocurrency Technologies Enhancing Financial Inclusion

Cryptocurrencies are more than just digital currency; they represent a revolutionary set of technologies that are expanding financial inclusion. Powered by blockchain innovation, these technologies provide millions of people with access to financial services, even in regions where traditional banks are out of reach. 

Let’s take a closer look at the key technologies that are reshaping the financial landscape.

Smart Contracts: Automating Financial Transactions

Smart contracts are self-executing digital agreements that automatically enforce terms when all parties fulfill their obligations. For example, a farmer in a remote area can enter into a contract with a seed supplier through blockchain technology. Once the payment is made, the smart contract automatically initiates the shipment, ensuring transparency and eliminating intermediaries.

Platforms like Ethereum serve as the backbone for creating smart contracts used in microloans, insurance, and international money transfers. In Brazil, the Moeda project leverages smart contracts to provide women entrepreneurs with loans without involving traditional banks.

Decentralized Finance (DeFi): Banking Without Banks

DeFi is a blockchain-based financial system that eliminates the need for banks, insurance companies, and other middlemen. All financial activities, from lending to investing, occur directly between users.

For example, users can earn interest by depositing their cryptocurrency on platforms like Aave or Compound, or they can borrow funds without the need for credit checks or bureaucratic processes. This is especially beneficial for those who lack access to traditional banking services due to geographical or social constraints.

Related: What Is DeFi Lending?

Lightning Network: Fast Micropayments with Low Fees

Lightning Network is a Layer 2 solution designed to scale Bitcoin transactions by enabling instant micropayments with minimal fees. This makes transactions fast, efficient, and cost-effective.

This technology is widely used in low-income countries to pay for goods and services.

For example, in El Salvador, where Bitcoin is recognized as legal tender, the Lightning Network allows local merchants to accept payments without relying on expensive banking terminals.

Related: Lightning Network and BTC: The Future of Global Payments

Stablecoins: Digital Financial Stability

One of the biggest challenges with traditional cryptocurrencies is their high volatility. Stablecoins like USDT and USDC solve this issue by being tied to the value of fiat currencies such as the US dollar or euro.

In countries facing hyperinflation, like Argentina and Venezuela, stablecoins have become increasingly popular among people seeking to safeguard their savings. They are widely used for everyday purchases and as a secure way to store wealth over the long term.

Crypto Wallets: Software and Mobile Solutions

To make cryptocurrencies more accessible, convenient mobile apps and digital wallets have been developed. 

For instance, Trust Wallet enables users to store multiple cryptocurrencies, exchange them, and make payments directly from their smartphones.

Crypto wallets come in various designs and formats. They can be physical storage devices, browser extensions, or even a simple piece of paper with a seed phrase stored securely.

Some manufacturers have introduced innovative wallet designs, such as rings or bank cards that function as secure crypto storage solutions. 

If you're wondering how to create your own crypto wallet, read our comprehensive guide for step-by-step instructions. 

Related: Hot Wallets vs Cold Wallets

Benefits of Cryptocurrencies for Financial Inclusion

Cryptocurrencies are revolutionizing access to financial services. They provide unique benefits that make them a powerful tool for people around the world, regardless of their economic background or social status.

Global Accessibility

Cryptocurrencies are not tied to any specific country or financial system. All it takes to create a crypto wallet is an internet connection. This makes them especially valuable for millions of people in regions where traditional banking services are inaccessible due to geographical or economic barriers.

Imagine someone living in a remote village who once had to travel long distances just to access banking services. Now, they can send and receive money, shop online, or even invest using nothing more than a smartphone. Cryptocurrencies eliminate borders, allowing people to make transactions and transfers without intermediaries or high fees.

Transparency

Cryptocurrency transactions are recorded on the blockchain, a public ledger that anyone can access. This ensures a high level of transparency and significantly reduces the risk of fraud.

In contrast to traditional banks or payment systems that can hide or alter transaction details, blockchain technology preserves all transaction data in its original form. This builds trust and minimizes the possibility of corruption.

Security

One of the key benefits of cryptocurrencies is their robust security. Each transaction is protected by advanced cryptography, making it virtually impossible to counterfeit or hack. Crypto wallets are further secured through passwords, private keys, and multi-factor authentication.

This level of security is particularly important for individuals in countries facing political or economic instability. While traditional bank accounts can be frozen or confiscated, cryptocurrencies give users full control over their funds, significantly reducing the risk of losing access due to external pressures.

The Future of Cryptocurrencies in Financial Inclusion

Cryptocurrencies are steadily becoming an integral part of the global financial system. Blockchain innovations, such as DeFi (Decentralized Finance), offer new tools for lending, investing, and saving money.

Governments may also explore the use of cryptocurrencies for distributing social benefits. For example, El Salvador has recognized Bitcoin as legal tender, unlocking new growth opportunities for the country. It has become a crypto hub and a tax haven, attracting both crypto enthusiasts and new residents. 

Cryptocurrencies offer a powerful way to address financial isolation. With their accessibility, low transaction costs, and transparency, they have the potential to transform the lives of billions.

Financial inclusion through cryptocurrencies goes beyond being a mere technological innovation; it is a significant step toward creating a more equitable and stable global economy.