Cryptocurrencies – Not just a new Asset Class but the Democratisation of Banking

Living and working in a developed economy, it is easy to view crypto as simply a new and interesting alternative investment class – a useful way to diversify a portfolio or earn yield. Crypto is yet another menu item on the abundant and sophisticated investment smorgasbord, competing for allocation.

What we lose sight of is the grand vision of cryptocurrency because to the investor in a developed economy, its value offering is fairly narrow. As someone who lives in Europe, has always worked in financial services and is an issuer of crypto ETPs, I am definitely guilty of defaulting to this limited view.

However, seen through the lens of an entrepreneur living in a country with an underdeveloped banking system, crypto is something completely different. It is an incredibly powerful enabler. To understand why, let’s revisit the grand vision of crypto.

With the advent of Bitcoin over 12 years, the first true cryptocurrency was born. For the first time a currency existed that was not tied to any government or central authority, it exists where the internet exists open to everybody regardless of national origin, caste, wealth level or social status. And not just a currency: within Bitcoin and other cryptocurrencies that followed, the payment rails to transact come as part of it meaning that anyone, anywhere with access to the internet could make and receive payments without needing a bank account.

According to the World Bank, 1/3rd of all adults don’t have a bank account – that’s over 1.7 billion people. In Argentina, more than half of the adult population do not have a bank account. These statistics are staggering enough without also taking into account the billions of underbanked; those with access to bank accounts but who don’t use them because the services are inadequate, too expensive or both.

Let’s imagine a scenario: Maria is a young and talented entrepreneur living in a country with a failed economy and hyperinflation. Through access to local raw materials, textiles and artisans, she has come up with a range of espadrilles that sell well to foreign tourists. One tourist, enchanted with her shoes, offered her access to a European distribution channel, an opportunity to scale up her business and pull her out of only subsisting on sales to tourist for part of the year – a real opportunity to pull herself out of poverty and a hope for better life. But without a bank account and with a currency in free fall, this life changing opportunity is closed to her. With cryptocurrencies, a smart phone is all she needs to be her own bank and make and receive payments in cryptocurrencies, have access to stable coins and, benefit from access to other financial services via defi. She will not be excluded because she doesn’t come from an “acceptable” social class or ethnicity but will be able to advance because of her own merits.

Now I am not saying that cryptocurrencies and blockchain technology are a panacea for all world banking ills or that the incumbent banking system needs to be scrapped, simply that with all the focus on the investment opportunity that crypto brings, one can easily lose sight of what an incredibly powerful enabler cryptocurrency can be for social upliftment – a true force for the democratisation of banking.