Saturday, June 15, 2024

Embracing Cryptocurrency for Economic Growth – Lessons for Pakistan from Other Developing Economies?

Cryptocurrency and blockchain technology have the potential to revolutionize the way we think about finance, investments, and entrepreneurship. As the world becomes increasingly digital, these technologies are gaining traction and changing the way we do business. For a country like Pakistan, which is facing a number of economic challenges and limitations, embracing cryptocurrency technology could be the key to achieving sustainable growth and development.

Let’s explore why Pakistan needs to embrace bitcoin technology for economic growth, and how it can help the country address its economic challenges.

Pakistan still harbors distrust and is wary of adopting digital financial systems. While the emerging and developed economies around the world are investing significantly in fintech, for Pakistan, cash is still the king. This lack of trust stems from:

  • limited financial education available to people
    • cases of security breaches in modes of digital payments and people losing money as a result
    • businesses still require cash as a mode of payment to evade tax net and other similar reasons, that make people question the security and viability of digital financial systems.

With such a poor rate of adoption for fintech in Pakistan, it seems a long way before people start accepting cryptocurrencies. Which is why it is important to educate people about how other emerging and developed economies are using crypto to their benefit, and how Pakistan can too embrace it for economic growth.

In Africa, countries such as Nigeria, Ghana, and South Africa have seen a surge in interest in cryptocurrencies, especially Decentralized Exchanges (DEX) like Binance and others as a means of promoting financial inclusion and bypassing traditional banking systems.

In Latin America, countries such as Brazil, Mexico, and Colombia have also been actively exploring the potential of cryptocurrencies to promote economic growth and attract investment. In fact, El Salvador recently made history by becoming the first country in the world to adopt Bitcoin as legal tender, a move that has been hailed by crypto enthusiasts and investors around the world.

Even in the Middle East, countries such as the United Arab Emirates and Saudi Arabia have been exploring the use of blockchain technology to promote innovation and entrepreneurship. By embracing cryptocurrencies and blockchain technology, these countries are positioning themselves as leaders in the digital economy and are attracting investment and talent from around the world.

As other nations begin to embrace these technologies and reap the benefits they offer, it is becoming increasingly clear that there is a need for countries like Pakistan to catch up.

Potential of Blockchain Technology for Pakistan

Secure and Transparent Financial Transactions

The biggest reason why people are hesitant in adopting cryptocurrencies and blockchain technology is because the assumption that it is not secure. This is largely a false assumption and a myth. If anything, blockchain and crypto transactions are highly secure and transparent.

When someone makes a financial transaction using cryptocurrency, the transaction is recorded on the blockchain, which is accessible to anyone on the network. This means that anyone can verify the transaction and its details, such as the amount of currency transferred and the time of the transaction.

Because the blockchain is decentralized, it cannot be altered by any one person or entity. This means that once a transaction is recorded on the blockchain, it is immutable and cannot be changed or deleted.

This creates transparency and accountability in financial transactions because everyone on the network can see the transaction and verify its details. There is no need for intermediaries, such as banks or other financial institutions, to verify the transaction, which can be slow and costly.

New Opportunities for Entrepreneurship and Investments

A developing country like Pakistan should develop an ecosystem that supports entrepreneurs and facilitate investors. Here are a few ways in which cryptocurrencies can help Pakistan create (and sustain) such an ecosystem:

  • By lowering transaction costs: Cryptocurrencies are often associated with lower transaction costs compared to traditional investment methods. This can help reduce barriers to entry for investors, particularly those with limited financial resources.
  • By reducing currency risk: Cryptocurrencies are not tied to a specific fiat currency, which can help reduce the risk of currency fluctuations. This can be particularly beneficial for investors who are looking to invest in a developing country with a less stable currency.
  • By offering greater liquidity: Cryptocurrencies can offer greater liquidity compared to traditional investments. This means that investors can easily buy and sell cryptocurrencies on exchanges, which can help increase the flow of capital into a developing country.
  • By eliminating the need of intermediaries: Cryptocurrencies are decentralized, which means that they are not controlled by a central authority, such as a government or a bank. This allows for a more transparent and secure investment environment, as there is no risk of interference or manipulation from any authority.
  • By increasing access to capital: Cryptocurrencies can help facilitate investments from people who may not have access to traditional financial institutions or who live in areas without a robust banking system. This can lead to a greater influx of capital into a developing country, which can be used to fund infrastructure projects, create jobs, and drive economic growth.

Overall, the adoption of cryptocurrencies can potentially help create a more inclusive and efficient investment environment in a developing country, which can ultimately help drive economic growth and development.

There are a number of success stories of increase in the investments influx because of adopting cryptocurrencies and blockchain technologies, from other developing countries. For example:

  • Kiva in Kenya: Kiva is a microlending platform that uses cryptocurrencies to facilitate loans to small business owners and entrepreneurs in developing countries. In Kenya, Kiva has partnered with BitPesa to allow lenders to send funds directly to borrowers using Bitcoin.
  • OmiseGO in Thailand: OmiseGO is a blockchain-based financial technology company that has received investment from several firms, including SBI Investment, SMDV, and Golden Gate Ventures. The company is working to create a decentralized financial network that can be used to facilitate cross-border payments and other financial transactions.
  • Bitso in Mexico: Bitso is a Mexican cryptocurrency exchange that has raised funding from several investors, including QED Investors and Kaszek Ventures. The exchange enables people in Mexico to buy and sell Bitcoin and other cryptocurrencies and has recently launched a remittance service that allows people to send money to and from the United States using Bitcoin.
  • Binance in Uganda/India/Nigeria/South Africa: Binance is one of the largest cryptocurrency exchanges in the world and has been actively involved in helping developing countries through a variety of initiatives. It has its own charity foundation that has helped provide food and supplies to the refugees in Uganda. It has an educational platform – Binance Academy – that provides free resources on blockchain technology and cryptocurrency and aims to make blockchain education accessible to people all around the world. It has also launched a fiat-to-crypto gateway in several developing countries, including Nigeria, South Africa, and Uganda. This allows people to easily buy and sell cryptocurrencies using their local currencies, which can help facilitate investment and financial inclusion.

Overall, Binance is using its position as a major player in the cryptocurrency space to help drive positive change in developing countries. By providing charitable support, educational resources, and investment opportunities, Binance is helping to build a more inclusive and sustainable financial system for people all around the world.

Wrapping up…

Cryptocurrencies address the limitations and challenges posed by financial institutions today. They are decentralized, highly secure, transparent, and efficient mode of transaction, that drive financial inclusivity. Like with any other mode of payment, or currency, cryptocurrencies do pose certain challenges. But with the right amount of caution, we can enjoy the perks and create a financial ecosystem in Pakistan that is inclusive, secure, and transparent and much needed in current economic predicament.

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