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From QR code payments to mobile banking apps, consumers around the world are increasingly dependent on digital payment solutions, especially as mobile technology becomes more ubiquitous. Government-led efforts to boost cashless economies have been a key factor, with countries like Singapore and the Philippines seeing their central banks driving the adoption of contactless payments at the height of the COVID-19 pandemic. As a result, usage rates of digital payment platforms have shown promising growth, even reaching 5,000% in the Philippines alone.
Related: Digitized Europe: The Transition to a Cashless World
This unprecedented increase in cashless payments is also paving the way for wider adoption of crypto, with the number of crypto users worldwide reaching around 106 million in January. Although this is an impressive 15% month-over-month growth, it is still only a drop in the ocean compared to the 4.7 billion people who have internet access.
But as crypto continues to grab the headlines, what will it take for mass adoption to happen?
A new model of financial accessibility
Today, billions of people around the world do not have access to even the most basic financial services through traditional means, and are therefore unable to save or manage their money safely. In times of economic devastation, like last year when global economies were shattered by the impact of COVID-19, the vast gap between rich and poor has become very clear. The global pandemic has only perpetuated the lack of inclusive financial infrastructure, leading about a third of the world’s population to have no financial safety net to fall back on.
With crypto wallets, however, anyone can transfer their crypto internationally without having to maintain a minimum balance in their account, as long as they have an internet connection. As crypto applications are built on decentralized blockchains, transactions are carried out on a peer-to-peer basis in the absence of traditional intermediaries such as bankers or brokerage houses. This translates into significant savings on transaction costs, as traditional cross-border transfer fees for small amounts can be as high as 7% after factoring in intermediary fees on both the sender’s and receiver’s side. Meanwhile, the same fees for cryptocurrencies are often less than 1% regardless of the transaction amount.
Related: Understanding the Systemic Shift from Digitization to Tokenization of Financial Services
Additionally, highly decentralized platforms are unlicensed, meaning anyone with a crypto wallet and internet connection can lend, hand over, or trade their crypto without validation by a central authority or intermediary. Instead, transactions are executed by smart contracts, which automate them as long as the pre-encoded conditions are met. Beyond the cost savings, also think about the time savings. Money transfer transactions can take several days to process, while cryptocurrencies can be transferred within minutes.
However, most crypto platforms still ask for some form of formal identification as part of their Know Your Customer and Identity (KYC) verification process. This can range from a phone number to photo ID to proof of residential address. Some platforms take a tiered approach where the more information users provide, the more services they can access. While necessary for KYC and anti-money laundering compliance, it poses obstacles for users who do not have any formal identification documents.
That said, some decentralized exchanges, or DEXs, still adhere to the principles of anonymity and working without trust by not applying KYC to their users. Eliminating account verification and waiting time for approval has drawn many people to these types of DEXs like PancakeSwap, Uniswap, and DeFiChains DEX and made finance truly accessible and inclusive for everyone.
Beyond simple transactions, recent innovations in the crypto space promise a much fairer financial system where unbanked and underbanked people can access more ways to build wealth. While DeFi products, such as token holding and staking on a DEX, may be a bit too advanced for this user group at the moment, the simplified Centralized Decentralized Finance (CeDeFi) services and Financial literacy over time will help open the door to these inclusive wealth creation opportunities.
Education is the key to large-scale crypto adoption
The widespread adoption of digital payment technologies, such as QR codes and biometrics, is certainly a promising sign that consumers have become more digital savvy than ever. In the Asia-Pacific region, more than 90% of those polled said they would consider at least one new payment method next year.
In addition to new payment technologies, the proliferation of retail investing has led to a paradigm shift in the investment landscape, with trading activity doubling in the past year. User-friendly platforms such as Robinhood and their well-known crypto counterparts such as Coinbase have made investing much more accessible to non-institutional investors.
Related: Massive Adoption Of Blockchain Technology Is Possible, And Education Is Key
This historic increase in cashless payments and retail investment has seen the public become more exposed to different types of assets. However, in the United States, 84% of adults are not interested in cryptocurrencies or have never heard of them. While this may be attributable to the seemingly intimidating technical details involved, we are now in a good position to gradually move to a more crypto-forward company.
For now, much remains to be done to help mainstream consumers better understand crypto. Crypto projects would do well to invest more resources in creating educational content to bridge the knowledge gap, whether through guides or in-depth explanations. Meanwhile, taking a more transparency-driven approach that seeks to demystify misconceptions and ensure that users are aware of the risks associated with crypto, will allow those users to navigate their entry into the space with more. ease and confidence.
Crypto is the cashless drive MVP
As cryptocurrency conversations evolve, governments are taking notice. While cash isn’t going to be phased out anytime soon, up to 86% of central banks around the world are looking at central bank digital currencies in their quest to become cashless. The world’s first central bank digital currency (CBDC), the sand dollar, was announced by the Central Bank of the Bahamas in 2018 and officially launched in October of last year. The tech team behind this project was led by U-Zyn Chua, who later co-founded DeFiChain.
Related: Have CBDCs Affected the Crypto Space in 2020 and What’s Next in 2021? Expert response
Although CBDCs are regulated by a central authority, their adoption will send a profound message to market participants about the legitimacy of digital currencies. The introduction of CBDCs is therefore an essential stepping stone to catalyze large-scale crypto adoption.
In the short term, crypto will not replace the existing financial system, but rather create its own ecosystem suitable for a new generation of financially savvy and above all digital users. While it will take some time for consumers to get used to crypto, the emerging technology will prove its worth in due course by providing cheaper, safer and more inclusive financial services for everyone.
This article does not contain any investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research before making a decision.
The views, thoughts and opinions expressed here are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Julian Hosp is the CEO and co-founder of Cake DeFi, a platform dedicated to accessing decentralized financial services and applications. He is also president of DeFiChain, a DeFi platform built on the Bitcoin network. Julian is an active speaker for the Washington Speakers Bureau and an advisor for blockchain groups in the EU. Julian graduated from Medizinische Universitat Innsbruck with a doctorate in human medicine.
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