Can Cryptocurrencies Help the Nearly 2 Billion People Worldwide Without a Bank Account?
When introducing Libra to the global audience, Facebook was clear that part of their motivation in designing, building and launching the new coin was to spread access to finance to some of the worlds poorest communities.
Commonly known as being unbanked, around 1.7 billion people are estimated to not have a bank account or access to any form of financial services.
— CryptoGlobe (@CryptoGlobeInfo) July 18, 2019
Many reasons could explain this staggeringly large number, from lack of infrastructure at a local, regional, or even national level; the prevalence of corruption eroding trust in financial institutions; the cost of using banking services being too high; or simply that many in the communities in question are characterized by a very high marginal propensity to consume due to low income, etc.
The consequences of this are serious for both the individuals involved – who find themselves unable to save, invest, make purchases on credit, earn interest, access loans and mortgages, etc – but it also generates major macroeconomic consequences too.
The low savings rate has significant knock-on consequences for the supply of loanable funds, which in turn influences real interest rates and therefore aggregate investment levels.
In this context, what are the chances that Libra will provide a solution to this problem?
Libra and the Unbanked
Whilst specific details are still scarce, several points can be made at this early stage.
Firstly, whilst the problem of the unbanked isnt new or only just being discovered, neither is the solution proposed by Facebook new or original. Researchers and analysts working in the field of blockchain applications have been aware of the massive potential for crypto payments systems to reach the unbanked for many years now. For instance, well-known researchers like Paul Vigna and Micheal J Casey were publishing on this theme as far back as early 2016.
Secondly, there seems no reason to believe the same problems affecting other projects of this type and with this goal wont also be faced by Facebook. Interestingly, the experience of firms like AssetStream and non-profit organizations like Stellar, has shown that technology isnt the core issue for such systems anymore.
In fact, a consensus seems to be emerging that the key hurdles to overcome for such proj ...