Vitalik Buterin, co-founder of Ethereum, speaks during the Singapore FinTech Festival in Singapore, … [+]
There are structural reasons why cryptocurrency is better equipped to survive as an international currency than traditional fiat currencies, according to Ethereum creator Vitalik Buterin. He believes in its ability to make cross-border payments easier, faster, and cheaper all over the world.
Modern solutions like PayPal, Wise, WorldRemit, and Western Union WU may have made it convenient to send money abroad, but they also have downsides. As with any financial institution, these companies have the ability to freeze or deactivate accounts anytime for multitude of reasons. This has been a common occurrence in developing nations where user accounts are deactivated and funds are frozen.
They also may charge higher fees for currency exchange, account maintenance, or transaction processing. According to the World Bank, the average cost of sending $200 internationally was 7.1% in the first quarter of 2021. That is equivalent to $14.20 which is the average weekly grocery expenses in the Philippines. This can be a significant burden for people who rely on sending money back home to their families.
Cryptocurrencies often have very low transaction fees, especially when compared to traditional financial systems, which can make them an appealing choice for users who need to make frequent or small transactions. For example, merchants in Brazil who accept cryptocurrency as payment may be able to save money on transaction fees compared to traditional payment methods like credit cards.
They also offer faster transaction speeds than traditional systems. For example, an expat working in Europe may be able to send money to their siblings in the India in seconds. “Often enough, cryptocurrency just is by far the easiest way to send money home to people’s families,” Buterin stated on the Bankless podcast.
In addition, cryptocurrency is also portable and secure. It can be easily stored and transferred digitally. For example, approximately 75.3% of the Philippine population own a smartphone in 2022, according to a Statista report. This suggests that a significant portion of the population has access to a device that can potentially be used to access and interact with cryptocurrency, which can facilitate its adoption.
Buterin addressed the recent collapse of FTX and the people who have used it as an opportunity to criticize cryptocurrency. He insisted that the world needs it for its decentralized nature, low transaction fees, fast transaction speeds, portability, and security.
“You go to all kinds of places in Latin America, Africa, the Middle East, Southeast Asia, and those kinds of places, and there the financial system is often not even well-connected to rich country financial systems,” Buterin said.
Overall, the neutrality, low-cost, fast, portable, and secure nature of cryptocurrency make it a strong candidate for an international currency, aspects that fiat currencies cannot have.
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