Bitcoin evangelist Andreas Antonopoulos thinks that bitcoin can solve the unbanked problem.
If you've spent any amount of time studying the unbanked problem, you'll know that Antonopoulos's claim is wrong for all sorts of reasons. Firstly, the World Bank estimates that there are 1.7 billion people who lack a bank account or mobile money access, not 4 billion. More importantly, the main hurdle to having a bank account isn't lack of ID, as implied in Antonopoulos's tweet. It's that people don't have enough money to open an account.
According to FDIC [pdf], 49% unbanked U.S. households cite “don’t have enough money to meet minimum balance requirements” as a reason for not having an account—the most cited reason. "Personal identification, credit, or former bank account problems" is far down the list of most-cited reasons, coming in at fifth.
In the Philippines, the number of unbanked Filipino adults stood at an incredible 51.2 million in 2019, or 71% of total adult population. The topmost reason for not having an account is "not enough money" as reported by almost half (45%) of the unbanked (see below). Lack of ID documents is the third most cited reason, at 26%.
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| Bangko Sentral ng Pilipinas 2019 Financial Inclusion Survey [pdf] |
The World Bank's 2017 Global Findex survey, which surveys more than 150,000 adults in over 140 economies, found that the most common reason (cited by two-thirds of the unbanked) for not have an account was "having too little money to use an account." Only one-fifth cited "lack of documentation and distrust in the financial system."
So let's not misconstrue the unbanked problem. As Yaya Fanusie put it last year: "People mainly lack financial services because they lack income and not the other way around. So, to effectively bank the unbanked, the key problem to solve is how to help people generate more income." Do read the rest of Fanusie's post, in which he provides level-headed critique of the ability for crypto to bank the unbanked.
Antonopolous really wants bitcoin to solve the unbanked problem. But if a household is too poor to to open a bank account, it's also too poor to buy some bitcoins. (Never mind that the last thing low-income families should be doing is gambling on wild bitcoin price changes.)
Bitcoin does solve a niche type of financial problem. Those who have been cut off from the payments system for political or legal reasons can use bitcoin as an censorship-resistant alternative payment rail. Sanctioned Cubans are using it. So do online shops that sell legal but controversial products like salvia divinorum or kratom. White supremacists cut off from PayPal rely on it for funding. And criminals use the bitcoin network, say to extract ransomware extortion payments or sell kiddie porn.
But this category of "unbanked" is small, and only partially overlaps with the 1.7 billion who are unbanked primarily because of poverty. Antonopolous does a disservice in grouping them together. He is banking on bitcoin solving a problem it's simply not fit to solve.
There are also people in developed countries that hold a BTC balance because they fear inflation and/or confiscation.
ReplyDeleteGiven high tax pressure and morbid public debt, both inflation and confiscatory taxes are a real risk. For inflation you can buy other assets in order to hedge it, but to avoid confiscation, despite being more volatile BTC is probably more secure and convenient than assets like physical gold, and unlike gold a BTC balance does not dilute over time due to supply growth.
If you read the Bangko Sentral ng Pilipinas's Financial Inclusion Survey, you'll see that 50% of Filipinos don't save, mostly because they are unemployed or don't earn enough. The unbanked simply don't make enough money to justify opening a bank account. Likewise, they don't have enough to buy bitcoin. What Filipinos need is a better salary. Neither bitcoins nor banks accounts fix this.
DeleteI fully agree with you on that part.
DeleteI was just missing in your second last paragraph that group of users from developed countries I describe above, who can afford buying Bitcoin and its volatility.
Excellent analysis but only applies when envisioning Bitcoin as something you buy or invest in or as digital gold, what it is not supposed to be. When understood as electronic cash between peers with no intermediaries and absolutely intractable, you are absolutely wrong in all your statements.
ReplyDeleteThe unbanked just need a gadget, "a pocket", to be able to transfer value between them and start accumulating wealth in a deflationary ecosystem that Bitcoin offers. What we need to focus on right now is how to provide them with a basic "wallet", inexpensive and secure enough for their daily growth.
I assume you already know and understand the overwhelming characteristics of Bitcoin but you may be somehow entitled to say otherwise or forced to say something different. If you are being paid in good fiat to spread these ideas I do respect it but you should just disclose it for your readers.
No intelligent human who truly understands Bitcoin´s purpose as cash can believe what you just wrote unless he is comfortable with his status and feels it may be compromised by adopting Bitcoin.
Yeah...but for the very poor that's Nano, without any fees, not Bitcoin.
DeleteAntonio, your suggestion that people who are living hand-to-mouth should use bitcoin is a silly idea.
DeleteBitcoin is a hyper volatile instrument. The only people who can afford to bear such dangerous volatility are the rich.
If a poor unbanked family decided to try paying for things with bitcoin, who would accept it at the local market? Bitcoin is not a widely accepted medium of exchange, and it never will be because it is unsuited for that purpose.
That's also not getting into the extremely high transaction costs of trying to use the bitcoin network if you try to remain on chain, the fees are high enough that it simply doesn't make sense to use it unless you're moving large volumes of bitcoin. Even with assuming lightning network is secure, you still need to put in a fairly substantial down payment in order to have enough liquidity.
DeleteYep, they don't need an access to "a sound money". What they need is an access to a free market economy, where they can improve their economic situation by doing productive work.
ReplyDeleteIt's quite weird how many cryptobeliever have forgotten this. They claim to be pro free market but this doesn't really show up in their words or actions. They think that people can easily earn a living in a madmax world as long as they can use bitcoin. But earning money is super hard if you don't have an access to a true free market economy whichs enforces the property right and the contract right.