Crypto Changes The Game For Emerging Markets

Flexibility, speed and low transaction fees.

These are some of the reasons why a growing number of consumers now see digital currencies as a viable method of sending money to peers abroad, circumventing the inefficiencies of the current conventional remittance system.

According to data published in a recent PYMNTS report on cross-border remittances, nearly a quarter (23%) of consumers surveyed who made cross-border peer-to-peer (P2P) online payments sent funds using at least one type of cryptocurrency, while 13% of consumers surveyed said cryptocurrencies were their most used payment method for online cross-border money transfers.

Read the report: The Digital Currency Shift: The Cross-Border Remittances Report

“[Cryptocurrency] helps get value across borders at a fraction of the cost and a fraction of the time it takes to get there in traditional systems,” said Farzam Ehsani, CEO of Johannesburg-based FinTech firm VALR , to PYMNTS in an interview. “On top of that, he doesn’t even necessarily have to touch a financial institution. It completely changed the face of the game.”

Beyond remittances, the use of cryptocurrency has exploded in emerging markets in recent years, helped by the large number of unbanked and underserved consumers and the high penetration of smartphones in these markets. .

Since its launch in 2019, the Ehsani co-founded cryptocurrency exchange has already processed over $8 billion in trading volume for over 275,000 retail and institutional clients globally, providing them with the ability to to buy, sell and store bitcoins and 60 other types of cryptocurrencies. at competitive prices.

One of the main benefits that institutional clients, who can be high-frequency traders or enterprises, derive from VALR is the use of virtual currencies to diversify their assets.

“Some of our large institutional clients don’t just want to have all the US dollars, [South African] rand or any other fiat currency on their balance sheet,” Ehsani explained, adding that due to the depreciation of the currency every year, companies are turning to crypto assets as a hedge against currency volatility.

He went on to say that the $50 million they recently raised in a Series B round will be used to expand the platform across Africa and into other emerging markets, continuing the company’s goal to create an inclusive financial system for its global customers.

“Bad” Crypto Regulation Is Dangerous

Regarding central bank digital currencies (CBDCs) gaining traction across the globe, Ehsani said it would be wrong to put them in the same category as crypto assets that are decentralized and free from external oversight.

“Yes, [CBDCs] use cryptography, but a central bank digital currency, as it implies, is centralized, meaning the government or central bank has full control over every transaction in that particular network,” he explained. .

Stablecoins, on the other hand, are going to play a key role in the meantime, he noted, as they free up US dollars from banking hours and allow people to transact with “whoever you want, at any time, almost instantly without worrying about whether a bank is open or not.

Recent data from the International Monetary Fund (IMF) also shows that the market capitalization of stablecoins has quadrupled to over $120 billion in 2021, with stablecoin trading volumes outpacing those of all other crypto assets. which is a further indication of its growing relevance in digital. economy.

Read more: Seizing the Global Cryptocurrency Payments Opportunity

Overall, he said maintaining a strong relationship with regulators will be key to navigating the complex world of digital assets and even stressed the need for proper regulation – “measured, educated and informed” – to guide the use of digital currencies and drive its growth across emerging markets.

However, he cautioned against “bad crypto regulation” — regulation that is rooted in fear, stunts the progress of entrepreneurs and the public, and completely excludes them from innovation.

“The regulations must be protective and not just a general ban. It would just drive everything underground and actually do the public a disservice and endanger it,” Ehsani said.

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On: While more than half of SMBs believe an all-in-one payment platform can save them time and improve cash flow visibility, 56% believe the solution could be difficult to integrate with AP systems and existing ARs. The Future Of Business Payables innovation report, a collaboration between PYMNTS and Plastiq, surveyed 500 SMBs with revenues between $500,000 and $100 million to explore how all-in-one solutions can exceed customer expectations. SMEs and help sustain their activities.

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Crypto Changes The Game For Emerging Markets

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