Over the past few decades, the inequality of wealth distribution globally has become all the starker.For example, as of 2022, the top 10% of Americans
Over the past few decades, the inequality of wealth distribution globally has become all the starker.
For example, as of 2022, the top 10% of Americans hold nearly 70% of US wealth. This means that 90% of the country only takes home 30% of the wealth. South Africa is another example, with the top 10% taking home 65% of the wealth.
Many citizens also lack access to general banking as well as high-class financial services (i.e., services limited to accredited investors) that are readily available to the more well-off residents. Cryptocurrency can help to reduce wealth disparity by providing users with access to a means to earn, store, receive, send and invest their money. This analysis looks at how cryptocurrency can help close the gap regarding income inequality.
How can crypto solve income equality?
Cryptocurrency gives users easier access to financial tools and a more affordable method of money remittance.
Many people in developing nations rely on their family members abroad to send money back to help with living expenses. Money remittances account for 20-38.5% of the GDP of countries like El Salvador, Haiti and Tonga. United States dollar-pegged stablecoins like USD Coin (USDC) and Tether (USDT) can ensure that the recipients receive more of the transferred funds without intermediaries taking a cut in the form of transfer fees.
SWIFT transfers can be costly, with some banks charging 3–5%, while others charge a fixed fee of $25-$45. Transfers via Western Union cost $25 on average for online transfers, $2.99–$29.99 via credit/debit card and $7.99 when done in-store. On the other hand, stablecoins like USDC can cost $3–$5 to send on Ethereum and less than a penny on BNB Smart Chain, Tron and Cardano blockchains.
While saving an extra $20–$44 on transaction fees might not seem like much to many people, this makes a big difference for people in developing countries or with lower incomes. For example, the average monthly salary in Venezuela is roughly $25.
These savings make it possible for people to make a better living from family members working overseas. In addition, family members will also be able to send money back home more frequently due to the very low fees and fast transaction times.
Ben Caselin, head of research and strategy at AAX — a cryptocurrency exchange — told Cointelegraph:
“Bitcoin, but also stablecoins, generally provide more accessibility than traditional banks, especially in emerging markets where large populations often find themselves unbanked either due to lack of infrastructure or documentation or exclusion in the basis of social standing, gender, religion or political viewpoints.”
“A shift toward Bitcoin and stablecoin payments can also be driven by sanctions or tight capital controls that make it virtually impossible for ordinary citizens and businesses to participate in the global economy either through trade, commerce or otherwise,” he added.
Caselin also noted the importance of the low costs when it comes to money remittance using cryptocurrency, saying, “users in both developed and emerging markets can benefit from bitcoin and digital assets when engaged in cross-border payments. This is not only because these are processed more efficiently on the blockchain but also at a much lower cost than through correspondent banks and money transfer operators such as Western Union.”
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“But it’s not just about accessibility and efficiency; switching to digital assets and self-custody over holding funds with a bank and using their services is building toward a new more mature financial culture and builds safety as societies continue to digitalize and threats to privacy and freedom proliferate.”
Easier access to payment systems
While PayPal is one the most popular ways of receiving payments for freelancers, users need to have their account linked to a bank in order to cash out their payments. This is because users can only withdraw money to their bank accounts, with the only other option being to spend the money with a PayPal debit card. This can make it difficult for unbanked members of a nation to make a living online.
Conversely, blockchain technology has enabled users to receive payments without needing an intermediary such as a bank. Users only need to own a crypto wallet to receive payment directly from another user. This can prove very useful for online freelancers. For example, if a freelancer is commissioned to develop a website or provide any other online service, they only need to provide their crypto wallet.
Dunstan Teo, co-founder of Philcoin — a blockchain-based philanthropy project — told Cointelegraph, “Cryptocurrencies typically need only a wallet and Internet connection for someone to sign up and transact. They offer an opportunity for those in developing nations to store their assets somewhere else other than under a mattress or in a cupboard.” He continued:
“This helps to…
cointelegraph.com