Author | Ryan Sean Adams

Author | Ryan Sean Adams

Translation | Mike Jin 

Editor | Iris Dong

Dear Bankless Community:

Emerging market banks are also bad.

People in these countries struggle with rampant inflation, regulatory hurdles, slow payments, and ridiculously high transaction costs.

How can the people of a country thrive if they don't have access to basic financial services?

Cryptocurrencies are solving this problem.

Slowly at first...then all at once. And it has already started.

First, cryptocurrency platforms in Asia and Latin America have higher web traffic than those in the US and other Western countries.

why? Because cryptocurrencies are becoming the best option available.

This does not mean that every citizen will open their own Ethereum address right away. I believe most of these early days are cryptocurrency fintech companies focused on a specific demographic and market niche.

They get more people into the business.

Vance Spencer calls it vertically integrated DeFi, and I expect it to be a major growth driver for cryptocurrencies.

The writer of today’s article happens to be from such a Latin America-focused cryptocurrency fintech company.

Read on to find out.

- RSA

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Staff Writer: Mohamed Elkasstawi, Co-Founder and CSO of Tribal Credit

Financial Solutions for Emerging Markets

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Cryptocurrencies Fight Inflation, Red Tape, Slow Payments, High Fees

In the U.S. and many other mature financial markets, cryptoassets are viewed as speculative investments—revolutionary, frivolous, or fake, depending on the source, but still profitable.In emerging markets, however, cryptocurrencies are playing a more important role in day-to-day financial transactions.

Driven by concerns about the health of their countries’ economies, individuals and businesses in emerging markets in Latin America, Africa and Southeast Asia are turning to bitcoin, ethereum, stablecoins and a host of other crypto assets."In fact, according to Chainanalysis'"Global Cryptocurrency Adoption Index 2021These people are using digital currencies as insurance against inflation, as a low-cost alternative to cross-border payments, as an on-ramp to online financial transactions, and as a transparent method of conducting financial transactions.

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The rise of cryptocurrencies in Latin AmericaIn Latin America — where countries such as Brazil, Chile, Colombia, Mexico and Peru are experiencing inflationary surges — a new middle class is emerging with a huge appetite for consumer goods, services, housing and mobility.

In some markets, this emerging middle class often lacks access to the traditional banking system and the capital to conduct large-scale cross-border transactions.

This is where cryptocurrencies come into play.

Cryptocurrencies offer a hedge against inflation, an alternative or supplement to traditional banking, and a cheaper method for individuals and businesses across the region to make cross-border payments.In Mexico, bitcoin has gained attention as an add-on to traditional financial services,

Provides a low-cost option for cross-border payments. Last year, migrant workers sent more than $40 billion to their families in Mexico, 2.5-3% of which ($1.2 billion) was processed by Bitso, the country’s main cryptocurrency platform.Of course, we also have El Salvador, the first country in the world to adopt Bitcoin as legal tender.

The move to make bitcoin a legal tender has been spurred by limited traditional financial services in El Salvador, where more than 70 percent of the population is unbanked. In several small communities, bitcoin emerged as the answer to the unbanked, and the rest of the country is following suit.Now, with Chile heading into an unpredictable presidential election and the economy still recovering from the fallout from COVID, inflation is at its highest level since 2016,

We can expect to see the role of cryptocurrencies grow in Chile as well.Bitcoin offered a solution for many Cubans when Western Union stopped sending money from the US to Cuba; through this model, Cubans could receive money from family members abroad and face severe inflation while saving their savings.

Now,Cuba's central bank is recognizing and regulating bitcoin and other cryptocurrencies and laying out new rules for how digital currencies should be handled.

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Tools for SMEs in Latin America

Cryptocurrencies have already infiltrated peer-to-peer financial transactions in Latin America, and it's time for businesses to embrace them.

Population growth is driving an unprecedented need for investment in infrastructure, large corporations are reaping profits, and small and medium enterprises (SMBs) may find it a challenge to obtain the necessary financial tools in a rapidly expanding economy.

Once again... bring out cryptocurrencies.

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In countries where inflation is concerned, cryptocurrencies offer SMEs the opportunity to store their funds as stablecoins — tokens whose value is pegged to another currency such as the U.S. dollar or gold — helping them avoid competition with more traditional cryptocurrencies. Currency-related fluctuations while avoiding the inflation of local fiat currencies.

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cross border payment

By converting payments into stablecoins, SMEs can send money anywhere in the world in minutes instead of days, without paying third-party fees and without worrying about inflation. This enables them to grow their business more efficiently than traditional payment rails.

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Helping the Unbanked

There are no minimum deposits or cumbersome approval procedures, meaning cryptocurrencies remove a large hurdle that has traditionally prevented SMEs from conducting virtual transactions.

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get a loan

For SMEs with limited collateral and little access to the traditional banking system, getting a loan can be cumbersome, though necessary. Now, many cryptocurrency platforms involved in decentralized finance (DeFi) are working to create undersecured loan products, creating new ways for SMEs to obtain much-needed loans.

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Start small: fintech is just the beginning

Advising all Latin American SMEs to immediately adopt cryptocurrencies is a daunting task – basic technical knowledge (not to mention blockchain technology), internet access, and customer needs can all be limiting factors for adoption.

We have to slowly ramp up with financial technology (FinTech) before more people can get started.

Fintech SMEs face many of the same challenges as other SMEs: inflation threatening their reserves. Their access to traditional bank accounts, loans and credit cards is often limited. And cross-border payments and other payment rails are slow and expensive. In fact, fintech firms – whose customers can be anywhere – are more likely to process slow and expensive international payments on a regular basis than SMEs that operate primarily in front of people.

However, unlike more traditional SMEs, FinTech SMEs already have basic technical knowledge and internet access due to the nature of their companies; they even have an online consumer base, which means that online financial transactions are part of their structure a natural part.

Ultimately, cryptocurrencies can help all SMEs around the world address the challenges of inflation, payment rails, and cross-border payments, especially in emerging markets like Latin America, the Middle East, and Southeast Asia. So let's start with fintech and then, out to the world.

The technical know-how, internet access and payment systems of fintech companies make it easy to transition to cryptocurrencies; let’s start with SMEs, who are mainly affected by inflation, expensive payment rails and entry barriers of traditional banking structures; let’s Start with Latin America, where fintech funding grew from $44 million in 2013 to $7.6 billion in 2021.

Over the next few years, cryptocurrencies could help small and medium businesses everywhere thrive.

For now, new cryptocurrency projects should look for opportunities to enter the Latin American market, while fintech SMEs should consider how cryptocurrencies can create new avenues for online transactions that are not influenced by third-party banks, as well as traditional financial services by providing protection against inflation. Payment Rails revolutionizes the way they transact by offering a cheaper, faster alternative.

There are opportunities for all parties to make money.