So guys, it's Friday, and I thought to switch things up a bit. Usually, I go for light posts, even when tackling heavy topics, but I think I'd set the fun and games a side for a bit today, just to discuss the benefits I have seen, personally, that crypto investing affords the underbanked. 

Identifying the Unbanked and the Underbanked

So just to get the definitions out of the way:

To be underbanked means that you can have a traditional checking or savings account, but beyond this you do not have much access to mainstream financial services, e.g., credit cards, loans and mortgages, etc whereas to be unbanked means you may not be able to meet minimum KYC requirements, let's think of immigrants and refugees, for example, or you may be so poor or live in communities so remote that you have no access to physical and/ or online banking services whatsoever.

Cryptocurrency has afforded this vast community with an opportunity to still earn and remit funds to loved ones without the red tape of the traditional banking system. And this is not to say that this red tape, KYC, for example, does not have value, it does, but it can be so restrictive sometimes that it can persons wishing to conduct legitimate transactions to operate on the fringe or, as in the case of the underbanked, to seek alternative financial services. 

Remittances

Remittances are, in essence, money transfers from migrants working abroad back to their home country.

According to the International Monetary Fund: "In a typical remittance transaction, the migrant sender pays the remittance to the sending agent using cash, check, money order, credit card, debit card, or a debit instruction sent by e-mail, phone, or through the Internet." So, in the case of traditional fiat, sending agencies can include banks to bank transfers, Western Union, MoneyGram, and PayPal, among others.

Upon receipt of the funds, the sending agency then instructs its agent in the recipient’s country to deliver the remittance and the paying agent makes the payment to the beneficiary. Open and shut, right? Well, not really. This process in the traditional system can be fraught with hiccups and delays. For example, bank to bank transfers can take days and, in some cases, banks can freeze accounts and withhold payments. PayPal has also been known, on occasion, to limit accounts or place payments on hold. These delays can be inconvenient, in the least, and in cases where the recipient is reliant on those transfers to survive day to day, they can be distressing. And there is the issue of fees which, depending on the sending agency, can be pretty hefty. This presents yet another deterrent. 

Enter cryptocurrency offering lightning transfers from wallet to wallet, moving across international borders with minimal middleman interventions, with zero hiccups and delays, and for fractions of a penny, and there's no question for the underbanked this financial service is, without a doubt, preferable.

Decentralized Borrowing and Lending

So if you're just learning about crypto investing, you might have heard the term DeFi, which is an abridged form of the term decentralized finance.

In a nutshell, what this means is that you can participate in financial transactions, e.g., lending, borrowing, and trading, without the involvement of a central bank or government agency. So there are these decentralized apps, or dApps (if you have a crypto wallet, you might see a tab pointing to dApps) which make it possible for parties to exchange, lend, borrow and trade directly using blockchain technology and smart contracts. Directly, no middlemen, and less cost overall. Cool, right? And get this, when you lend out your cryptocurrency, interest is earned in minutes rather than waiting till the end of the month and the return is way better than you'd get from a bank. If you apply for a loan, you get it instantly. No KYC, no credit checks, instantly. You don't have to cap in hand, don't have to wring your hands, don't have to taste the salt of any tears or feel the shame of rejection from being turned away as often happens in banks. See why DeFi is so popular?

Save and Earn High Interest

I might mention here that cryptocurrency investing can also offer higher percentage returns on savings than you would get from a traditional saving account in the bank. So, take digital financial institutions like Nexo and Celsius, for example, they offer high interest rates paid out daily, like Nexo offers up to 18%  APR and Celsius advertises up to 17%, while you retain full control of your funds, i.e., you don't have to lock it up in staking, and you're still getting high returns, just for leaving your digital assets idle. 

Now, you get the appeal of cryptocurrency as an industry, right? And this is just a cursory outline of just some of the advantages one can gain from cryptocurrency investing. This is not to say that the industry is not fraught with risks and challenges.

Challenges in Crypto Investing

Among the key challenges faced are the risk of being the exposed to unscrupulous scammers and theft, the unstable value of cryptocurrency coins, and the heavy hand of regulation attempting to strangle the industry in some parts of the world. Added to that, there is, admittedly, a fairly steep learning curve. For example, cryptocurrencies are digital assets, and so, if the argument is that many in the unbanked world do not have access to the Internet and phone data, etc., then this presents a barrier to entry. 

Outlook

I firmly believe that there is a lot of opportunity for growth in this industry and this is why I believe so firmly in cryptocurrency trading and investing, even in a bear season when my coins lose value. I am looking at the long term potential here. I am looking at the fact that, according to reports, there are almost 2 billion people around the world who shut out of the mainstream economy, without a bank account, forced to work illegally in some cases, and looking for a solution. There are a lot of people who still do not understand blockchain technology and cryptocurrencies. I don't know much, there's a lot that I'd love to learn though, because I see potential and I see that there is a huge population who, if they come to understand the freedom and independence and power that cryptocurrency can represent, would definitely be on board.  My holdings are tiny today, but I live in hope for a future where more people like myself, can get on board. I believe cryptocurrency is here for the long haul. 

Cryptocurrency has grown a lot in the past decade. Volatile, yes, fraught with risks, yes, but I don't think this is a bubble. This is a global development, and so, I don't subscribe to reports either that this is comparable to the US subprime mortgage crisis. I don't, but what do I know? I'm not a financial expert. I'm just a member of the working poor, one of the underbanked, a minnow in a sea of sharks. But what do you guys think? Do you think cryptocurrency investing and transactions provide opportunities to benefit the poor, do you think it can only benefit huge investors, or do you think, like some sceptics do, that this is a bubble that is bound to burst? I'd love to hear your thoughts, guys.

Well, that's it for me today. I'm off to have a relaxing Friday, sipping some beers, reflecting on my past week, and planning for the week of crypto trading ahead. Be safe out there, y'all. Until the next one, arriverderci!