Bitcoin has long moved on from being seen as a shady currency used only for illegal purchases. There has been plenty of hype surrounding Bitcoin and other cryptocurrencies in recent months, especially with regard to start-up technology businesses and overseas transfers. However, it is becoming increasingly recognised that Bitcoin may have other, more ethical benefits.

According to the World Bank, more than two billion adults lack access to bank accounts and credit cards to save and borrow funds. McKinsey suggest 2.5 billion people have no credit score, meaning that they can’t buy a home or start a company; which is where Bitcoin comes in.

One of the biggest benefits of Bitcoin for the unbanked population is its cost – or lack of.

Bitcoin is the first Internetwide payment system where transactions either happen with no fees or very low fees. According to a research by ODI, Africa’s diaspora pays 12% to send $200 back home. And according to the same research, Western Union in Rwanda charges closer to 18–19%. With Bitcoin, currency transfer costs are far lower than banks or even companies such as Transferwise.

Similarly, the lower cost of international transfer could be a real boost to SMEs in emerging nations, where small businesses struggle to compete internationally due to costs associated with changing currencies and processing fees.

The second big benefit of Bitcoin is its independence. The system works without a central repository or single administrator, meaning it is a completely decentralised virtual currency. It is not subject to market control by one organisation.

This feature makes Bitcoin inherently useful, in that many countries with a large unbanked population are countries where corruption is high. With Bitcoin, there is no need to do not trust banks; wealth held in bitcoins can be securely stored free of transaction fees for an indefinite period, and cannot easily be expropriated by the state or limited in any meaningful way in their movement between jurisdictions by capital controls.

Similarly, for countries in economic difficulty, they cannot be devalued over time by inflationary monetary policies. With the recent trouble with Greece, Bitcoin became seen as a viable option for holding money should Greece exit the euro.

Venezuelan-born Meyer ‘Micky’ Malka is a director at the Bitcoin Foundation. He believes that what bitcoin can do is “embrace transparency in a country where there isn’t any”.

“It’s an asset for when you do not trust your government, which is a real aspect of what’s going on down there right now.”

Both its low cost and independence make Bitcoin an attractive way of storing and sending money cheaply for those with no bank account. Yes, cryptocurrencies are a relatively new phenomenon, and that comes with its own difficulties; as Malka says, “you cannot expect bitcoin at five years old to take all that responsibility and act like a grown-up. It is still a toddler.”

However, the figures cannot be ignored. With over two billion people not having access to simple financial services that allow them to save, invest or grow their businesses, there will always be a certain proportion of the population who have no hope of working their way up. The World Bank Group President Jim Yong Kim has said that access to financial services is “a bridge out of poverty”; if Bitcoin can help those developing countries get on the ladder, it is well worth investigating.



Miranda Wadham on 18/08/2015
Previous articleTwitter eyes up Asian expansion
Next articleIf Carlsberg did profit warnings…