A new financial and technological infrastructure is being built around stablecoins that is global, open source, and accessible to anyone with an internet connection, regardless of nationality, ethnicity, race or gender or socioeconomic class. Cryptocurrencies such as stablecoins are intended to be used as a means of exchange for a range of other currencies. When it comes to cryptocurrency mining, it has typically focused on the speculative and risky nature of the new investable asset class, as well as its use in cybercrime and the dark web, and the negative environmental, social, and governance (ESG) consequences associated with the practice. It has also addressed the potential victimisation of uninformed consumers in certain instances.
There has been a lack of discussion or documentation about the fact that this new hotbed of global and open financial experimentation in the crypto economy is producing tangible, programmable, and modular technologies that are focused on value store applications such as peer-to-peer micropayments and lending as well as margin/collateralization applications such as market making and price discovery. The present generation of automated technologies is being tested in real life by millions of people with billions of dollars, with the hope that they will evolve and lead to the financial inclusion of billions of underserved and unbanked people in the future, through the provision of simple to set-up and low-cost automated financial services on a large scale.
This new global and inclusive open financial system has been developing and maturing in plain sight and is available to us for more than a decade, but maybe not enough of us are getting our hands dirty and helping to shepherd this sociological and technical phenomena to its final destination.
Providing easy access to useful and affordable financial products and services such as payments, savings, credit, and insurance is crucial for the nearly 1.7 billion people who are still unbanked or have very limited access to financial services. It has been estimated that widespread use of stablecoins – financial services delivered via mobile phones, the internet, or cards – will increase the annual GDP of all emerging economies by $3.7 trillion, with two-thirds of the increase attributed to increased productivity of financial and non-financial businesses and governments as a result of digital payments, and the remaining one-third attributed to additional investment resulting from broader financial inclusion of people and micro, small, and medium-sized enterprises (MSMEs). The increased GDP generated by widespread use of digital finance might result in the creation of up to 95 million jobs across all industries.
Historically, financial inclusion efforts have been fueled by government sponsorship and the activity of institutions and banks. Although unintentionally, the growing popularity of internet community-based open source technology development, as well as the increasing investment in stablecoins, suggests that the seeds of a grassroots effort to build the technological infrastructure for an alternative open and inclusive financial system are being sown.
Anyone who is reading this text (who, for example, has an internet connection) can begin participating in a stablecoin network as soon as they finish reading. Here’s a whole new financial system to which you can gain access on your own initiative. Have we ever come across an open system in which everyone anywhere in the globe could engage in any way they want and at whatever depth they desired, with no prerequisites or qualifications other than the ability to use a device capable of connecting to the internet?
We will only see systemic waves of change comparable to those that we have witnessed in our lives, such as the Internet of Information, which democratized the creation, dissemination, and accessibility of information and content. What will the new Internet of Value imply for the development, distribution, and access to value and financial services, and how will it affect the financial services industry?
According to Jane Thomason, co-founder of the British Blockchain and Frontier Tech Association, stablecoins have the potential to benefit excluded communities in emerging markets, populations under threat, and humanitarian situations, among other things.
The coronavirus epidemic has highlighted the critical need for low-cost, direct digital transfers, as currencies throughout the world have plummeted as a result of the currency devaluation.
Stablecoins in particular, as well as blockchain technology as a whole, have “really assisted us in bringing individuals who have previously been excluded from the financial system into the financial system,” added Thomason.
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Stablecoins have the ability to provide safe and convenient transactions at a cheaper cost than mobile money, while also avoiding the risks associated with volatility.
“With a basic cell phone, individuals all around the globe have the opportunity to participate in the global financial system, from which they have hitherto been barred,” Thomason explained.
With the bulk of cryptocurrency users worldwide located in countries like Kenya, Nigeria, South Africa, Venezuela, Colombia, and Vietnam, emerging markets are adopting cryptocurrency in a significant way.
The cryptocurrency market is attracting consumers from emerging economies such as Latin America, Africa, and East Asia who are want to protect their investments from being wiped out by economic turmoil.
Highly volatile cryptocurrencies, according to Thomason, will pose a risk to those at the bottom of the economic distribution ladder.
When compared to other cryptocurrencies, such as bitcoin and ethereum, stablecoins (also known as stablecoins) are cryptocurrencies that are backed by an asset, most commonly a ‘fiat currency.’
They retain much of the attractiveness of existing cryptocurrencies, however, while also providing investors with access to a new and expanding asset class of assets.
Jane Thomason is a co-founder of the British Blockchain and Frontier Technology Association, which was established in 2015.
Since the beginning of May 2021, the entire market capitalization of stablecoins has risen to $100 billion (AED367 billion), representing a significant increase from the previous year, when they were valued at more than $10 billion.
Despite the fact that a slew of stablecoins have been introduced, tether remains the most popular, accounting for 94 percent of overall stablecoin transaction volume, according to blockchain data platform Chainalysis.
“If new kinds of digital money can be made secure, they have the potential to contribute to faster, cheaper, and more efficient payments with improved functionality,” Thomason stated.
It is possible that they may strengthen the durability of payments and may even secure long-term financial stability.”
When asked about how cryptocurrency is providing new chances for the ‘unbanked,’ she responded that “emerging markets are accepting crypto because it addresses real world issues…
People needed to be able to send and receive money during the epidemic, even if nations were closing down, banks were closing down, and money exchanges were closing down.
“Individuals need to provide money to people in times of calamity or crises, whether it’s for medical treatment or to purchase essential goods,” says the author.
The use of blockchain technology, according to Thomason, will assist to alleviate common worries for emerging economies over cross-border payments, stating: “Whether it’s remittances or welfare payments, they can be transferred straight into their wallets inexpensively, efficiently, and transparently.”
Blockchain technology is also helping to increase female financial inclusion by assisting women in improving their socioeconomic standing, improving the results of household businesses, and increasing their resilience in the face of financial shocks, among other things.
It’s true that many of the women in this study lack credit histories, but Thomason points out that utilising digital payments helps them to build up their credit histories, which then allows them to borrow money from microfinance companies.
This remarkable technology offers the required infrastructure for the decentralized, anonymous tracking and transaction of digital currencies all across the world, and it is still evolving. While stablecoins allow for the continuation of operations, their utility extends beyond the realm of cash. For example, financial institutions and fintech payment businesses have previously expressed a strong interest in this technology in the past.
The potential uses of stablecoins driven by blockchain technology are diverse, ranging from insurance and real estate to crowdfunding and data management. It is expected that new ways of integrating blockchain technology into the mainstream business sector will emerge in the future.
If you live in a developed nation, it’s possible that you take unlimited access to the financial system for granted, but this is not the case.
It is possible that this sort of access will appear unachievable if you live in a developing nation with limited financial and technological resources. There should be few technical reasons not to participate, assess for yourself what is happening in the stablecoin ecosystem, and perhaps contribute to shaping better outcomes for our global community – through new business models, technology, education, regulatory advocacy and clarity, as well as consumer protection awareness – whatever the reason. Participation is open to anybody who wishes to participate.