In a piece for The Atlantic, Kyle Coward asks an interestingquestion –WhyAre So Few Black People Using Bitcoin? Bitcoin technology, in theory, hasthe potential to deliver financial services in radically new ways that cut outthe middleman and reduce costs for the low-income communities who often pay themost as a percentage of their income in fees to access basic bankingservices.
Nevertheless, these supposed game changing applications ofBitcoin remain just that—theory. We are yet to see a killer use case thatappeals to mainstream consumers using Bitcoin technology. Even the cross-borderremittances market, often heralded as one of the most promising avenues forBitcoin entrepreneurs to cut costs and create value, remains a tough nut tocrack as we noted in a recent Mercatorresearch report. Since Bitcoin transfers can be made without relying oninternational correspondent banking channels, one would expect Bitcoin backedremittance services to quickly undercut the likes of Western Union. However,bank charges are a small part of Western Union’s costs. Maintaining anextensive agent network that is easily accessible to the underbanked andcomplying with KYC/AML regulations are significant cost drivers that cannot be wishedaway just by pointing to the technical elegance of the blockchainalgorithm.
Bitcoin-based financial products wthat are both regulatedand serve a clear need may yet revolutionize the lives of the underbanked, evenif they are unfamiliar with the inner workings of the blockchain. Until suchtime, however, it would be highly irresponsible to encourage individuals who donot fully understand the risks, to directly invest in such a volatilecommodity.
Even a financial analyst as bullish on Bitcoin as Colasacknowledges these concerns should not be taken lightly. “Typically,lower-income households should primarily focus on trying, as best they can, tobuild up a small savings buffer,” he says. “That isn’t necessarily well-servedby having it in Bitcoin because of the volatility of the currency.”
Overview by Nikhil Joseph, Analyst, Emerging Technologies for Mercator Advisory Group
Read full story at The Atlantic
