The world has a population that cannot reach the bank estimated to be around two billion. This means that cryptocurrencies and especially the financial services DeFi can offer can help many people.
Today, there are few types of people who cannot access banking services. Some cannot access a bank account due to the costs involved, while others do not use an account as it has very little to offer.
DeFi ecosystems, which gained popularity last year, are identified as a potential solution for the global unbanked. DeFi can effectively replace the existing financial system and provide access to advanced financial services to anyone with a smartphone. However, there is a major problem DeFi also faces. Many governments take a tough stance against DeFi and cryptocurrencies.
Will Not Develop Soon
Of the nearly two billion people without bank accounts globally, 190 million live in India, which has the second highest number of people without bank accounts globally, after China.
Despite the fact that DeFi and digital currencies can help nearly 200 million people access financial services, the Central Bank of India has created barriers for any company or individuals seeking to use decentralized currency in India.
When people are denied access to core cryptocurrency functions, there is no way DeFi can help the unbanked around the world, which will be one of the biggest problems of the developing DeFi ecosystem.
Rather than helping poor people access financial services today, many politicians seem determined to disenfranchise poor people as much as possible. Prohibitions on cryptocurrencies and systems such as DeFi pose these problems today.
Government Bans Harm
In 2016, the Modi government decided to ban all 500 and 1,000 rupee bills (at that time the 500 rupee bills were worth about $ 7) in an attempt to bail out the Indian economy from the kind of corruption caused by $ 10 bills. Needless to say, the criminals were not affected by this act, but every individual who had an investment of 500 and 1000 rupee banknotes suffered serious losses. There are several lessons we can draw from this, but the two biggest ones are how important an apolitical currency is and also how dangerous the political class can be.
When people cannot compete through innovation and are forced to use a single platform, new and better ideas are left to disappear in uncertainty. Unfortunately, we have a global monopoly of money that blocks attempts to create systems that offer everyone the chance to use the latest financial technology. Undoubtedly, DeFi is not a mature technology and the decentralized currency continues to take its place in the global economy.
Microfinance Can Be Beneficial
There are numerous academic studies pointing out the power of microfinance to help the poorest people in the world and that accessing small amounts of capital can improve the local economy. Microfinance is just one aspect of the DeFi economy and others can be equally useful when a person has accumulated some capital and wants to find a return that does not involve a central bank that has a monopoly over the nation’s monetary system.