Why Unbanked People in Europe Are Not Using Crypto for Everyday Payments

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Barclays Bank cash machine where business people queue or enter their PIN codes from cash accounts, or just pass by. A middle-aged man looks at the poor guy warily while other rich, promising and successful men are tall and stand in smart suits and polished shoes, the homeless man is hunched and disheveled, carrying a bag supermarket – containing perhaps all his worldly goods. It is a tragic scene of extremes between the haves and the have-nots; the rich and the poor; between those who are hopeful and those who are desperate. This is the City of London, near Fenchurch Street station, where the British insurance companies are based and it is impossible to know if any of these men in smart clothes are the same age as the poor male. (Photo by In Pictures Ltd./Corbis via Getty Images)Corbis via Getty Images

Oh, the unbanked don’t use crypto! Monique Morrow, co-founder of Swiss nonprofit The Humanized Internet, told me in an interview.

Morrow added that the identification issue is the biggest hurdle. Crypto exchanges and trading platforms, just like banks, require government-issued credentials for know-your-customer compliance processes. Unbanked people often do not have a passport to meet these KYC requirements. In short, crypto companies and banks often have the same limitations when it comes to serving the unbanked.

As such, data on cryptocurrency usage for the unbanked European population is non-existent. This fact alone can speak volumes. According to a 2022 report published by crypto exchange Gemini, only 17% of the general European population uses cryptocurrencies. Based on his interactions with unbanked homeless people, Andrew Funk, the founder of the international non-profit organization HomelessEntrepreneur, told me in an interview that he rarely saw unbanked people using crypto. .

It’s not surprising. A 2021 study finds that regions with a higher percentage of unbanked individuals exhibit lower, not higher, bitcoin usage based on analysis of all Bitnodes operating globally between 2014 and 2018. he study found that bitcoin infrastructure currently serves the banked population more than the unbanked.

Another 2021 study based on data provided by the Federal Reserve Bank of Atlanta since 2009, paints a portrait of the typical cryptocurrency user that contrasts sharply with the profile of the typical unbanked person provided by the latest report. ESBG: poor, unemployed, under-educated, female, and in Europe, older. Unfortunately, these people may not have a political voice, so their needs are ignored by lawmakers who write regulations that could cut them off from the cryptocurrency market.

Regulation of crypto exchanges is a double-edged sword, Elena Gavrielidou, external legal adviser to the Cyprus Securities and Exchange Commission, told me in an interview. Beyond compliance issues, a general lack of financial literacy may limit undereducated Europeans, again highlighting that the same issues that prevent unbanked people from using traditional fintech providers also create barriers to integration into the crypto ecosystem.

Gavrielidou added that European legislation, such as the 5th Anti-Money Laundering Directive and regulation in crypto asset markets, inevitably alienates certain categories of people outside the banking system. These corporate data collection requirements make it harder for unbanked people to use cryptocurrencies. She also noted a lack of European initiatives that directly promote financial inclusion.

To make matters worse, Funk said the unbanked often lack the financial education needed to understand and research digital assets. The general population is not necessarily more educated or aware. However, the unbanked are at higher risk. These people may already be struggling to meet their basic needs. Therefore, unless the process of receiving and using cryptocurrencies for everyday purchases – like buying bread – becomes super easy, the unbanked are unlikely to use them. They will use the solution that will work. And right now, highly volatile cryptocurrencies don’t work for most everyday purchases.

On the bright side, some organizations like The Humanized Internet and Shinhan Bank are already working to improve accessibility for unbanked crypto users in Europe. Zenobia Godschalk, senior vice president of blockchain firm HederaHBAR, said in an interview with me that her company is working with Shinhan Bank on a proof of concept facilitating low-cost, locally-denominated stable transactions on the Hedera network that could benefit to users without a bank account.

Meanwhile, some universities are offering free and accessible blockchain training courses and engaging with lawmakers as well as marginalized self-taught students. By fostering financial literacy and awareness and forging partnerships among stakeholders, such initiatives could help create a more inclusive economy where global payment networks can become a reality, even for the unbanked.

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I teach courses in Finance and Decentralized Finance for the Blockchain and Digital Currency M.Sc. program at the University of Nicosia and have published research papers in the field. I have a doctorate. (and an M.Sc.) in Finance from the University of Cyprus and an M.Sc. in Information Management from Lancaster University. I own and trade modest amounts of BTC and ETH and my current passion is making blockchain technology accessible to diverse audiences.

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