In 2021 roughly a third of the entire global adult population remains unbanked — an estimated 1.7 billion people that have been left behind by the shortcomings of an outdated, inadequate, and inefficient financial system. If we are going to make this right, we need to overhaul current legacy systems and create something that’s fair, inexpensive, open, and fit for the digital era.

Fortunately, cryptocurrency and other technological innovations are starting to lay the foundation for a more open and inclusive global financial system. Cryptocurrencies have surged in popularity globally, and while they may have not yet reached mainstream adoption, there is an entire arm of the industry working to make sure this technology becomes accessible to all. 

Through education, innovation and co-operation with existing financial institutions and regulators, a new democratic financial system is manifesting a lot faster than many have anticipated.

Why has cryptocurrency been difficult to access, and what’s changed?

Because cryptocurrencies function in a completely different manner to traditional financial applications (operated by institutions), everyday consumers can often have difficulty placing trust in a system that has no entity behind it.  At first cryptocurrencies were only used by a small number of internet natives that mostly understood the technology, people that felt comfortable interacting with a completely new kind of financial application. For years their usage remained within this fringe community, and as a result financial institutions, businesses and people had difficulty building trust and confidence in them.

However, as access to crypto has improved, people have started to increasingly understand the vast array of positive use cases of this technology. Trading platforms have been developed with a keen focus on delivering an improved user experience, and with the regular debut of new cryptocurrencies, many are becoming intrigued and excited beyond the most well-known cryptocurrency, Bitcoin. Alongside the noted expansion of the Bitcoin ecosystem, numerous cryptocurrency platforms are starting to disrupt the traditional financial sector and expand the usage case of the technology exponentially. Cryptocurrencies are no longer simply an investment option, they can be used for everything from instant low-cost remittance, to peer-to-peer lending, to high-interest savings accounts – with an open and global community of developers continuously innovating new functionalities.

Why it’s so important that a democratic financial system ecosystem is created

The traditional financial sector has failed to enforce systemic transparency, offer lower fees, and improve speed of service. But because of the advent of blockchain technology, cryptocurrency is well-positioned to tackle all these major issues.

Traditional finance has historically failed to eradicate fraud, in part due to the multi-dimensionality of tactics employed by malicious actors, and in part due to the opaqueness of the systems in place to monitor and report it. Blockchain technology has radically improved the ability of compliance officers to fight fraud, introducing transactions that are peer-to-peer and irreversible, recorded on a decentralized ledger for an immutable record of events and balances.

Additionally and crucially, the peer-to-peer nature of cryptocurrency dramatically reduces the opportunity for corruption — cryptocurrency transactions never pass through intermediaries. Because of their unprecedented ability to enforce transparency, cryptocurrencies have quickly gained traction in developing countries. Charities such as The Red Cross have already taken steps in integrating blockchain technology to alleviate the problems associated with cash, particularly in ‘disaster-prone areas.’

The process of transferring money across borders remains frustratingly slow and expensive, when in theory using blockchain, transaction costs could move to zero and reduce transfer time from days to seconds. For example, in one step a person could transfer traditional fiat currency into cryptocurrency and send this cryptocurrency to anyone in the world, instantly, with the opportunity for the recipient to hold the value in its current form or to cash it out into their local currency. What’s crucial here is that neither sender nor receiver needs a bank account for this to work, or even for the two parties to manually convert to and from cryptocurrency.

What still needs to be done?

Of course, the transformation to a new financial system isn’t going to happen overnight.

While it is still nascent, cryptocurrency will generally provide more advantages on a macro scale for high-value transactions rather than on an everyday micro scale, such as mundane transactions like payment for groceries. However, as more innovators come together to work with regulators and financial institutions there will be additional opportunities to develop the technology further to reduce costs and have a real impact on society. As testament to this, we are increasingly seeing regulators welcoming the use of cryptocurrency and a surge in the creation of legislation supporting the introduction of cryptocurrency into mainstream society, in a safe and compliant way.

In the short-term, cryptocurrency is not going to eliminate the existing financial system, but instead, create a system which is fit for the digital age – providing cheaper, safer and faster services to all, not just the 70% of the world who have a bank account.

If we focus on educating people about the many ways cryptocurrency democratises finance, we can accelerate the process of moving towards a more inclusive and fair global financial system.