Experts believe that it will take some time for the consumers to warm up to cryptocurrencies. However, education is the key to its mass adoption. From mobile banking apps to QR code payments, consumers throughout the world are increasingly becoming reliant on digital payment solutions, mainly as mobile technology gradually becomes more dominant.
Many government-led efforts in driving the cashless economies have been a critical factor, with nations like the Philippines and Singapore seeing their central banks pushing for the adoption of contactless payments during the heights of the coronavirus pandemic.
As a result, the usage rates of digital payments platforms have recorded promising growth of up to 5,000% in the Philippines alone.
The unexpected surge in cashless payments is also paving the way for the widespread adoption of cryptos, with the number of cryptocurrency users globally hitting around 106 million as of January 2021. While it marks an incredible 15% month-on-month growth, it still appears to be a drop in the ocean when compared to the 4.7 billion people who have significant access to the internet.
But as cryptocurrency continues to dominate the headlines, what will it take for mass adoption to happen?
A Contemporary Model Of Financial Accessibility
Currently, billions of people around the world cannot access even basic financial services through traditional means. Therefore, they cannot save or manage their money securely. During incidents of economic crisis, including what happened in 2021 where the global economies were impacted heavily by the effect of COVID-19, the major gap between the rich and the poor has now become quite clear.
The pandemic has perpetuated the absence of an inclusive financial network, which has resulted in nearly one-third of the global population having no defined financial safety net to fall back on. But, with the crypto wallets, anyone is allowed to transfer their cryptocurrency internationally without having to maintain a minimum balance in their account, provided that they have an internet connection.
As cryptocurrency applications are developed on decentralized blockchains, all transactions are performed on a peer-to-peer basis in the absence of traditional intermediaries like banks and brokerage houses. That strategy results in considerable savings in the transaction costs, with the traditional cross-border remittance fees for small amounts being as high as 7% after considering intermediaries’ fees on both the sender and recipient side.
In the meantime, the same fees for crypto are mostly less than 1 percent irrespective of the transaction amount. Moreover, the highly decentralized platforms are permissionless, which means that anyone with a cryptocurrency wallet and internet connection can remit, lend, and trade their cryptocurrency without validation by a central authority or intermediary.
However, the transactions are executed by smart contracts that automate them as long as pre-encoded conditions are met. Apart from cost savings, there is an aspect of time-saving too. Remittance transactions can take many days to get processed, while cryptos can be transferred within minutes.
A majority of the crypto platforms still ask for some type of formal identification as part of their identity authentication and Know Your Customer (KYC) process. It can range from a phone number to a photo ID to proof of residential addresses.
Some of the platforms adopt a multi-tier approach where the more information users provide, the more services they can access. While important for KYC and Anti-Money Laundering compliance, it poses several barriers to the users that do not own any formal identification documents.
After saying that, some of the decentralized exchanges (DEXs) still honor the principles of anonymity and trustless operations by not enforcing KYC on their users. The elimination of account authentication and waiting time for approval has attracted many users towards these types of DEXs, including Uniswap, PancakeSwap, and DeFiChain’s DEX. It has made finance truly accessible and inclusive for all.
Beyond the simple transactions, recent innovations in the cryptocurrency world promise a much more equitable financial system where the underbanked and unbanked can access adequate means to build their wealth. While the DeFi products like token holding and staking on a DEX maybe somehow advanced for most of the users currently, simplified centralized decentralized finance (CeDeFi) services and enhancements in financial literacy over time will help in opening the door to these inclusive wealth creation opportunities.
Education Will Help Crypto Mass Adoption
Massive adoption of digital payment technologies, like QR codes and biometrics, is a promising sign that consumers have become more digitally savvy than ever before. In the Asia Pacific region, over 90% of the surveyed respondents said that they would consider at least one new payment method in the coming year.
Adding onto the new payment technologies, the proliferation of retail investing has resulted in a paradigm shift in the investment landscape, with trading activities doubling in the past 12 months. User-friendly platforms like Robinhood and renowned crypto counterparts like Coinbase have made crypto investments more accessible to non-institutional investors.
The historic surge in cashless payments and retail investing saw the public gain increased exposure to various asset types. Nonetheless, in the US, a massive 84% of adults are not interested or have never heard of cryptocurrencies. While this may be a result of the intimidating technicalities involved, the world is now in a great place to slowly transition towards a more crypto-forward society.
For today, there is a lot that needs to be done to help mainstream consumers gain a better understanding of cryptocurrencies. First, crypto projects might do well to invest more resources towards creating some educational content to bridge the existing knowledge gap, whether through guides or even detailed explainers.
In the meantime, taking on a more transparency-focused approach that seems to debunk misconceptions and guarantee that users are aware of the risks that are associated with cryptocurrency, will enable the users to navigate their entry into the space with much ease and confidence.
Crypto Is King In The Cashless Campaign
As the conversation surrounding cryptos keeps evolving, the governments are taking note. Cash will not be eliminated any time soon. But, up to 86% of the central banks worldwide are looking into the central bank digital currencies (CBDC) world in an attempt to go cashless.
The first CBDC in the world, the Sand Dollar, was unveiled by the Central Bank of Bahamas sometime in 2018 and officially launched in October 2021. Notably, the technology team behind the project was led by U-Zyn Chua, who later on co-founded DeFiChain.
Even though the CBDCs will be regulated by a central authority, their adoption is expected to send a profound message to market participants on the legitimacy of digital currencies. This introduction of CBDCs is therefore a much-needed springboard to catalyze large-scale cryptocurrency adoption.
In the near term, cryptocurrency is not going to replace the current financial systems, but it will instead create a distinct ecosystem that is fit for a new generation of digital-first, financially savvy users.
While all this might take some time for the consumers to warm up to cryptos, the budding technology will prove its worth in due time by providing safer, cheaper, and more inclusive financial services for all.