Many people, especially in the developed world, don’t understand the point of crypto. If the traditional banking system works well for you, you feel no need to try and replace it with anything. Did you spot the keyword in that sentence? The traditional banking system might work quite well… FOR YOU. There are many around the world who aren’t that lucky.
According to a16z, one of the biggest Venture Capitalists in the world, there are 1.7 billion people across the globe who don’t have access to bank accounts. Of these people, 1 billion of them have mobile phones and 480 million have access to the internet. Decentralised finance has the potential to change the lives of some of these people.
But, yet again, we’re talking about potential. Let’s talk about what’s going on right now.
The majority of Afghans do not have bank accounts. Using crypto, they can store their savings in a place where the Taliban cannot find them. As well as this, because of sanctions against the Taliban, there is a liquidity crisis in the country. Banks can’t lend money and retail customers can’t take their money out of banks. This is another reason why the use of crypto has spread so rapidly. 22-year-old Farhan Hotak spoke to the BBC and said "After the Taliban takeover, crypto spread like wildfire over Afghanistan," he said. "There is almost no other way to receive money".
Many Palestinians are cut off from the rest of the world. And we’re not just talking about physical barriers and blockades - we mean the digital world too. Many Palestinians are locked out of payment apps, so they are turning to Bitcoin and using it to transact and invest.
When Russia invaded Ukraine, the banking system in Ukraine stopped working. Banks shut down and limited access to bank accounts and foreign currency. Crypto provided a way around these restrictions for Ukrainian citizens.
There was also evidence that some Ukrainians used crypto to assist them while fleeing. They left the country, accessed their crypto wallets and turned that crypto back into fiat currency, once they reached safety.
The economic situation in parts of Latin America right now is not a good one. Inflation is rampant and to combat this, interest rates are very high. Mexico's central bank raised rates to an all-time high of 8.5% and Brazil's base rate is 13.75%. But those numbers pale in comparison to Argentina, where the reference interest rate is 75%! Bear in mind that this is the reference rate. If an Argentinian citizen wants a loan from a bank, the interest rate they will have to pay on it is much higher - sometimes over 200%.
These high interest rates are squeezing people's access to credit and meaning that they can't borrow the money they need. Borrowers in Latam have turned to crypto loans, where the interest rate they pay is about half that of the rates offered by local banks.
Ledn is a Canada-based crypto lending platform. Latin America now accounts for around 50% of the loans granted by Ledn. Buenbit is a Latin American crypto exchange that has started offering crypto loans, and on average 30 loans are opened and 25 closed every day on Buenbit's platform. Num Finance is another platform offering loans in NuARS and NuPen (stablecoins pegged to the Argentinian Peso and Peruvian Sol respectively). According to Num Finance's CEO, more than $250,000 worth of loans was leant out by the company last month.
In some of the situations we have outlined above, charities used crypto to solicit donations. The Ukrainian government raised $100 million in crypto donations. The Giving Block has raised $100 million, and its mission is to allow organisations to raise crypto donations.
The major advantage of crypto donations is speed. Instead of having to wait days for banks to process payments, crypto donations can mean that funds are sent, received and spent where they need to be spent in double quick time.
So yes, maybe you think buying a picture of a monkey for $3.4 million is quite stupid. And yes, maybe a lot of the talk about web3 is about future promises. But make no mistake about it - crypto is making a difference in people’s lives right now.