10 ms·

Cryptocurrency and the unbanked

49 points by ben_talent 5y ago

zinekeller 5y ago
Eh, probably, but so can mobile banking solutions[1] that are popular in Africa. Unlike in, for example, Europe where mobile payments requires a (relatively fancy) phone, M-Pesa works even on basic phones, which you can't say about cryptocurrencies in general. This is not to dismiss them, of course, but "conventional" currency already has a solution for this, so unless you're advocating for decentralisation (which is a different issue altogether), I don't think that cryptocurrency can serve the unbanked without radical changes that will also benefit conventional banking. P.S. If you instead measure unbanked/underbanked by percentages (and exclude mobile banks like M-Pesa), you can see Japan and Korea on top 25[2], which isn't to say that they're poor (which also includes China which was mentioned in the article), but because of cultural differences. If you include the likes of M-Pesa, the graph slides slightly so that it shows that Asians (in general) tend to be the underbanked, which is technically true but doesn't automatically mean that they're poor. [1] For example, M-Pesa (https://en.wikipedia.org/wiki/M-Pesa https://en.wikipedia.org/wiki/M-Pesa) [2] Last data I read about this is on 2017, so this might have changed? But my point still stands out.
- AussieWog93 5y ago
  I thought the same thing when reading the article. Crypto for this particular problem seems like the proverbial sledgehammer to crack open the walnut.
  - usrusr 5y ago
    More like using a flotilla of Kuka industrial robotic arms to open a walnut. If financial literacy is hard, what's crypto-financial literacy?
  - EdwardDiego 5y ago
    Cryptocurrency really feels like a solution desperately in need of a problem.
    - masklinn 5y ago
      > a solution desperately in need of a problem. Or a pyramid scheme in need of an excuse / justification.
      - BrianOnHN 5y ago
        Or a massively multiplayer online game of hot potato.
      - shadowprofile76 5y ago
        Please do define how Bitcoin or Ethereum (among others) are "pyramid schemes". Cryptocurrencies have indeed been used for pyramid schemes by specific actors, but then again so has normal money, and many other things. Numerous people on this site who presumably have the intellectual faculties to know better toss that little qualification out from their mouths almost reflexively out of emotional crypto-hate, but have apparently never even read a basic encyclopedia definition of pyramid scheme structure.
        imtringued 5y ago
        It doesn't matter if it is a crypto scheme or pyramid scheme. The token itself is not a product, the central distributor sells you tokens in a presale and then you have to recruit new members through marketing the token and sell them your tokens. The point is that there is no end goal. The last person to buy the token didn't get chocolate coins that he can eat.
        EdwardDiego 5y ago
        The current crypto bubbles seem to be working on the "greater fool" theory, same principle can be argued to underpin MLMs - your downline are your "greater fools", and you only make money so long as you (or your existing fools can) can recruit more fools.
        deleted 5y ago
        [deleted]
    - chii 5y ago
- _ink_ 5y ago
  The Critisism section of that Wikipedia article paints a rather grim picture of M-Pesa in Kenya. To me it looks like the people could benefit from a decentralized finance system that is run by enthusiasts rather than by turbo capitalists.
  - zinekeller 5y ago
    I'm not saying that M-Pesa is perfect but 1) I mentioned M-Pesa because it is the largest one in Africa. There are also smaller players there. 2) While there are problems that is specific to M-Pesa or even conventional currency, looking at the landscape of cryptocurrencies some problems, which in my opinion is inherent in how do you define value, are problems that even cryptocurrency has fallen trap into.
- n0mad01 5y ago
  Then how come that 57% of Africa's population lacking any form of bank account.
  - louwrentius 5y ago
    Because of non-technical reasons: like economical and political reasons. Cryptocoins won't solve those issues, nor can they bypass them.
  - zinekeller 5y ago
    ... mainly things that aren't even fixable by cryptocurrency? - Wars. Most people in warzones don't want to hold a bank account because it is very unreliable. Cryptocurrency won't solve that problem, in fact it will exacerbate the problem because of your phone or computer is damaged it's game over[1]. Also, how do you even transact when you don't have any form of communication? - Actually don't have anything to bank on. Their money is just enough to survive, so they can't even bank, regardless of its form. Giving cryptocurrency is often a proposed solution, while forgetting that regular currency works fine too in these situations. - Cultural differences. Most, to be honest, don't want to depart their money to someone they don't know. They were introduced to money just a generation or two ago, so they are relatively new here. Good luck convincing that cryptocurrency is trustworthy in a way that can be easily understand. [1] I mean you could write them on paper, but that's really stretching it, mainly because you need a computer to execute transactions.
- 3np 5y ago
  (I don't feel I'm expressing myself well here, but bear with me:) Something that tends to be underappreciated is the risk associated with contemporary mobile payments solutions. Both the individual and the local economy become incredibly reliant on a small number of private companies. For more well-off individuals who can spread their risk ad easily switch providers, this is much less of a practical risk and therefore are likely to shrug off. They also tend to have access to providers with human support and better platforms. Consider also that for multi-national providers, they become affected in new ways to foreign domestic and international policies and politics. These are just some ways in which people become serfs, at real mercy of the whims and fate of politics and businesses. Last week, thousands of people who had Coinbase accounts in Japan are now forced to close them due to them now only being available for Japanese citizens (as opposed to residents). This is probably not more than an annoyance for most of those affected, but transfer that to migrant populations and mobile banking in Africa and things get dark pretty quickly. Cryptocurrencies (when done in a way that liberates the user as opposed to being wrapped in centralized fintech) break this dynamic completely.
  - zinekeller 5y ago
    > Cryptocurrencies (when done in a way that liberates the user as opposed to being wrapped in centralized fintech) break this dynamic completely. Now, tell me how to do this exactly? (At least a general sketch?) Because I really think that this is really not a problem that can be seen with cryptocurrency, but rather with how societies work, which is hard to solve. I don't want to favour one or the other, but societal problems are something that require all of the cogs are working. Even if I assume that people are willing to use cryptocurrencies, oppressive governments can seize digital gadgets out of their hands, much as they can block transactions. I also don't have a solution to this unfortunately, and I feel that this is unsolvable.
    - lowkey 5y ago
      See Bitcoin’s BIP-39. With crypto, if I can remember 12 words I can freely transport my life savings anywhere in the world and no government can seize my wealth without torturing me into giving up my passphrase. Can you share a similar strategy for refugees using fiat, gold, real estate, stocks or bonds?
- mrtksn 5y ago
  There's other groups of people who have access to money and tech but lack access to banking: persecuted people, financially ruined people or people with irregular documents. 1) persecuted: For example, a religious cult grew to require power in the government in Turkey, clashed with the official government and even tried a military coup and failed. Following the coup, those with direct involvement to the coup went to jail and anyone known to be associated with the cult lost access everything and even their bank accounts were closed(they had a regular Banking institution that was seized) and other banks often refused to open an account for those who were associated with the cult. As a result, they started using money transfer services that are not banks and keep to money in cash. 2) financially ruined: People who screwed up or got unlucky in something and lost everything. Many would work and do business outside of the official channels and as a result they don't want to keep the money in traditional institutions because the money can be blocked or seized due to their financial situation. Also, they won't be able to get any benefit of a bank, so all they need is a way to keep and transfer money. 3) irregulars: Those are usually immigrants who entered a country trough illegal ways or overstayed their visas. In most places, they wont be able to provide the documents to open a bank account or even get a TV subscription but they will be working and making money for many years until they sort out their situation. They will need ways to get payed and pay bills, rent etc. Therefore, "unbanked" doesn't really mean too poor, many times it means "unserviceable clients". The "decentralised" aspect can actually mean no one is left out since the usreviceability of those people come from the central government in the region.
  - zinekeller 5y ago
    You have good points here, and this reminds me of MasterCard getting giddy with pornographic transactions, even in areas where it is fully legal. However, I think that cryptocurrency will only solve 3) in your list. For 1), they often seize everything, to the point that they seize computers and phones. Even if they are smart to have a backup, I'm pretty sure that they will try to hoover up anything and everything, even regular currency. For 2), I think that this is a societal problem, really. In France (as an example), you are entitled to a bank account regardless of your status, that even means if you have been convicted of money laundering. On the flipside, and I am assuming to use cryptocurrencies like Monero which makes transaction tracking harder, if you are really wanted you could end up in situation that I described on 1).
- api 5y ago
  Conventional currency can do anything cryptocurrency can do with far less overhead and usually less complexity… if you can trust someone. The problem is that centralized trust creates moral hazard and over time tends to be abused. Abuse of centralized trust can be incredibly destructive both financially and in humanitarian terms. To me the key question is which is cheaper? Is it cheaper to run cryptocurrency with all its overhead or is it cheaper to use faster cheaper simpler centralized systems and “eat” corruption and abuse since those represent the hidden costs of those systems. The answer differs depending on which society you are evaluating and it’s corruption index. It’s not the unbanked that represent a hidden base of cryptocurrency users. It’s those that reside in kleptocracies and failed states.
- panarky 5y ago
  The story is bigger than just in-person payments, it's also about remote payments, cross-border transfers, and savings. Sure "conventional" paper currency is already a good solution for in-person payments, but it doesn't work for remote payments, international transfers or savings. Cashapp has compelling answers for remote domestic payments and savings in the US, and TransferWise is great for international transfers among wealthy nations. These three are the use cases we're seeing blossom in El Salvador where Cashapp and TransferWise aren't available. I suspect this is an Innovator's Dilemma situation, where crytpocurrency solutions are honed and adapted in emerging markets, then eventually compete with established players in rich nations.
pudo 5y ago
Towards the end, the author claims that the benefit of crypto will be to teach people financial literacy. Not only is that a little bit like teaching people responsible drinking by bringing them to the Oktoberfest, I'm also not sure all the people who do not have bank accounts are really going to use their late-model iPads to watch CryptoBroTube to learn about stablecoins and NFTs... Nominating this post for the "hand-waving argument of the year" awards.
- laurentdemarez 5y ago
  I don't think this is what the author meant. I think the key here is that it's easier for people to obtain financial literacy because crypto is more accessible than the current financial system.
  - hammyhavoc 5y ago
    Can you explain how it is more accessible? Grandma isn't doing crypto.
    - kibbleble 5y ago
      How is email more accessible than Usenet? Grandma isn't doing SMTP
  - lottin 5y ago
    Which is a ridiculous claim, both because 1) crypto is not more accessible, and 2) being able to access more financial services doesn't make you less financially illiterate.
    - 9krxk9xy 5y ago
      How is it not more accessible? To open a bank account in the United States, you have to provide an absurd amount of identification and contact information. This usually includes: >Your name & date-of-birth >Your social security number >Your driver's license and/or passport >A video selfie for some online banks >Your street address >Your email address >Your phone number Some of those items can be difficult acquire and maintain, especially if you're starting from nothing. Additionally, many banks require a deposit, and most if not all online banks won't accept it in cash. Most online banks now also require a closed-source app that will, on Android, most likely also require Google SafetyNet, excluding many custom rom users. The street address requirement is a burden on those who live nomadic lifestyles, as you cannot (legally, iirc) use a virtual mailbox, and you have to depend on friends or family to receive any mail they send you. I attempted to open an account at Ally last month and they denied me because they couldn't verify my identity, even though I'd accurately provided everything they asked me for. I assume it's because I'm not in the ChexSystems database or have no credit history. On the other hand, I can get an open-source bitcoin wallet on my PinePhone and just use it.
sub7 5y ago
Crypto is for the ultra banked. To make profit via speculation. And insider trading. Gross conflicts everywhere. Hope it all burns down.
- ejanus 5y ago
  Why?
- numair 5y ago
  > Crypto is for the ultra banked. Sometimes the bottom of the comments stack on HN has the most profound comment in the entire conversation. I think this is a good example. By the way, congrats sub7, you invented the phrase “ultra banked.” I hope the investment banks credit you when it lands in an analyst report.
- atc 5y ago
  Please back up these sensationalist claims with some evidence otherwise I'll apply "That which can be asserted without evidence, can be dismissed without evidence."
jesussaves 5y ago
https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline... Betteridge's law of headlines is an adage that states: "Any headline that ends in a question mark can be answered by the word no."
beshrkayali 5y ago
> Crypto doesn't care who you are and where you live. Anyone can start with crypto. The only thing you need is a mobile phone and an internet connection that doesn't even have to be especially good. Most people today have both. Even though centralized exchanges such as Binance or Coinbase require you to provide identification documents, crypto wallets require no such thing. Crypto is a solution for anyone who needs to receive or send money anonymously. I think it’s more accurate to say: Crypto is a solution for anyone who needs to receive or send money “privately” (rather than) “anonymously”. The idea that you don’t need documents or to provide additional self identifying information (like name and address) doesn’t necessarily mean anonymity, or (imo) should anonymity be a top priority even (not that that’s not important), but being able to spend and transfer money to places where tradition banking doesn’t operate or without being charged extra is. Whatever mess a system’s/government’s economical plan might lead to, people’s money won’t be tied to it and wouldn’t be affected. Also, you don’t really need a smart phone, any old laptop that can run Linux would do.(which are usually cheaper, more available and function better than a phone)
- rose8 5y ago
  thanks for the comment. Makes sense to use „privately“ instead of „anonymously“.
jsemrau 5y ago
Not yet. The on and off-ramps are still way too complicated. Getting an account with one of the established banks (a.k.a exchanges) is painful. AML/KYC takes weeks, the user interface is a mess, every turn costs you "fees", trading is dominated by whales when they move their money around to pump some shit-err... alt-coin, and finally getting back into fiat so you can actually use all of the "in-game" currency is slow and expensive again. While I work on a crypto solution through my startup, the current state of affairs has still a lot of room to grow.
- bradwood 5y ago
  On and off ramps are predicated on the necessity to transfer fiat into and out of crypto. This (some would argue) is just an intermediary state before _everything_ is crypto. In El Salvador, there is no need to off-ramp fiat into BTC...
  - jsemrau 5y ago
    Yes, I'd hope that. At some point I'd like to buy milk with Banano's I earned from watching JungleTV.
  - davidgerard 5y ago
    > In El Salvador, there is no need to off-ramp fiat into BTC... This is a functionally incorrect description of how the system is working there, or doesn't. In practice, the bitcoin systems there are tremendously unreliable, and the populace hates everything about it. I wrote this about how it's going: https://archive.is/mJY30 https://archive.is/mJY30 You could argue that none of what went wrong with it is "bitcoin" per se - but then, the "bitcoin" system that El Salvador actually has doesn't resemble what Nakamoto proposed in any way.
    - el-salvador 5y ago
      I went to a shopping earlier earlier this week in El Salvador, and spoke to one of the cashiers about their experience with BTC while shopping. "We have two Bitcoin payment processors, one from a private bank and another is the state owned wallet. We have had only two clients attempting to pay with bitcoin and both transactions failed. The state owned one has been down for most of the week, and the private bank app can't receive payments from the state owned one".
davidgerard 5y ago
This is ridiculous crypto pumping. None of this works unless the world already runs on crypto. And not even El Salvador actually does that, because the populace hate the bitcoin system, the official payment network is completely unreliable, and the unofficial wallets don't have the fees subsidised. The most common issue with "banking the unbanked" is a lack of sufficient documentation. This is not a problem in El Salvador, because they have a national ID card, and you can get a basic bank account with that. And yet, only 30% in El Salvador have a bank account. What does crypto do about that? What need does crypto fill that the existing basic accounts are failing to? I wrote a book chapter about this crypto marketing buzzphrase. It's been a common buzzphrase in bitcoin and other cryptos since 2013 - and zero of these people have ever given a joined-up account of how this is supposed to work in practice. Not even Facebook, when they put banking the unbanked as a key advantage of their proposed Libra cryptocurrency. https://davidgerard.co.uk/blockchain/2021/02/12/libra-shrugged-chapter-6-banking-the-unbanked/ https://davidgerard.co.uk/blockchain/2021/02/12/libra-shrugg... "Banking the unbanked" is a complex problem, and crypto addresses none of the hard bits.
- louwrentius 5y ago
  100% Agree. Frankly, I think this article doesn't belong on HN in any shape or form. It's just people shilling left and right to pretend that cryptocurrencies will be a thing. They aren't and the will never be, because they can't. Cryptocurrencies will make few people rich, but most people, the ones too ashamed to admit it, will lose it all and then some. Ask yourself: where does the money come from? Answer: that lambo is paid with other people's money. For every 'lambo driver', there are a thousand suckers who lost. And had to lose to pay for that lambo. I write all of this because I think cryptocurrencies are asinine in every possible way. They play on every weakness humans may have and they undermine our environment and our societies, without anything in return. And let's be totally honest about this: it was never about banking the unbanked. It was always about one thing, and one thing only: getting rich, no matter the consequences (for others).
  - ben_talent 5y ago
    Hey I reposted this article The conclusion of the article says: "... it's not a magical solution. The reasons for financial exclusion are rooted in deep inequality" What kind of articles do belong on HN?
Ronziee7251 5y ago
There's probably technologies that are easier to use to solve the unbanked problem. What I find interesting about the article is that it seems to acknowledge this problem. It's doesn't seem like a "crypto is the solution" article. Crypto is inclusive in the sense that anyone can participate, but exclusive in the sense that the knowledge barrier is really high. Does anyone know about any kind of project that teaches young people about financial literacy?
- louwrentius 5y ago
  The 'unbanked' problem isn't a technical issue in the first place.
flixic 5y ago
Despite benefiting tremendously from crpyto, I don’t believe this narrative. The article mentions the core problem: being your own bank is a HUGE risk. I can accept that risk and deal with complex security mechanisms I have to maintain to both protect my own bank and keep it accessible. But a good security guide for crypto is 20-30 pages and requires serious cryptographic understanding. Currently, I can’t expect that from average users. Everything can be solved over time. Social recovery wallets and user-friendly hardware might become mainstream. But I don’t see that happening in the next 5-6 years, and I fully expect CBDCs to be far along in that time. Then, countries will be a lot less motivated to promote crypto for the unbanked.
redka 5y ago
As usual, here on HN, any time something is posted that relates to cryptocurrencies the discussion gets filled with negativity and even, seemingly unprovoked, outright hostility toward the idea. Overall HN (in my opinion) has a very good quality of discussion and I often read the comments before opening a link or even just for the sake of it. Nevertheless when it comes to cryptocurrencies that assumption goes out the window and I'm bound to see overly negative attitude to the point of irrationality. It's surprising to me how, out of all the places, HN would be the one where that's the case. I wonder if anyone has any theories on why that is? I dare to assume that it's not just my ignorance of some fundamental, unrecoverable flaw in the concept itself that motivates some to speak against it with such certainty. It might be partly a lack of understanding of the multitude of available options (and even those not yet conceived) and how different - "cryptos" can be from each other but I don't understand how that would translate to people writing unprovoked, unsubstantiated claims or even just unrelated but unhelpful, overly negative remarks. Is it some negative experience someone had that traumatized them? Why HN has this problem?
- ObamaBinSpying 5y ago
  Maybe they are sorry they missed out on the run so far (being in the tech. field).
- shimonabi 5y ago
  Maybe smart people are overrepresented on HN. Most of the crypto-bros I know haven't written a single line of code in their life.
- ilammy 5y ago
  Not everyone registered is posting on every topic. Not everyone having an opinion is posting in the topic they read. Making unsubstantiated claims is easier than laying down concrete arguments. You quickly run out of pearls to throw before the swine. “Venting” is more socially acceptable than “preaching”. And there is a matter of customs and culture: people see that badmouthing happens more often than singing praises, and so the cycle continues. HN is evidently the place where you don’t often see positive discussions of the merits on the front page, so that’s exactly what you see, and even if you have something to say you’d rather keep your mouth shut. But you see slandering comments in every topic so if you want to leave another then by all means, feel right at home. All of this does not even take into account whether there are any technical merits worthy of continued discussion and fervent defense, or everything on this particular topic has been said already and perceived as general knowledge among the literate.
rich_sasha 5y ago
I think saying crypto is better than no bank [for the poor] is a bit like saying loan sharks are better than no loans. In a literal sense that’s definitely true: having more options must be uniformly good, and sometimes you want these options for sure. And yet no one says “yay loan sharks bring financial freedom”, more like “let’s fix poverty and lack of banking”. On balance I think that if you cannot have a bank account then a crypto economy may well be better (but omg the transaction fees), but that shouldn’t be a blueprint for financial advancement.
plebianRube 5y ago
> Consequently, knowledge is the most vital asset to be able to use the financial opportunities that crypto offers. Knowledge about how to use the technology and, more importantly, about cyber security. How can I keep my money safe? Which dapps are good to exchange, loan, and lend money, and how do I recognize scams? I think increasing knowledge is one of mankind's highest aspirations. If after doing research, you find it isn't for you, so much the better. At least you've increased your knowledge. People who knee-jerk react and downvote without having knowledge of the space seems to be the norm here. Crypto isn't something that can be learned in an afternoon, or be taught with a few comments. It is an overlap of technological and social space that is evolving constantly.
shimonabi 5y ago
I'm just reading the book "Attack of the 50 Foot Blockchain" by David Gerard. https://www.goodreads.com/en/book/show/35525995-attack-of-the-50-foot-blockchain https://www.goodreads.com/en/book/show/35525995-attack-of-th... It was published in 2017, but lists all the false arguments the author of this article makes. Even M-Pesa, mentioned in a lot of replies of the commenters, is mentioned.

49 points by ben_talent 5y ago

Eh, probably, but so can mobile banking solutions[1] that are popular in Africa. Unlike in, for example, Europe where mobile payments requires a (relatively fancy) phone, M-Pesa works even on basic phones, which you can't say about cryptocurrencies in general. This is not to dismiss them, of course, but "conventional" currency already has a solution for this, so unless you're advocating for decentralisation (which is a different issue altogether), I don't think that cryptocurrency can serve the unbanked without radical changes that will also benefit conventional banking. P.S. If you instead measure unbanked/underbanked by percentages (and exclude mobile banks like M-Pesa), you can see Japan and Korea on top 25[2], which isn't to say that they're poor (which also includes China which was mentioned in the article), but because of cultural differences. If you include the likes of M-Pesa, the graph slides slightly so that it shows that Asians (in general) tend to be the underbanked, which is technically true but doesn't automatically mean that they're poor. [1] For example, M-Pesa (https://en.wikipedia.org/wiki/M-Pesa https://en.wikipedia.org/wiki/M-Pesa) [2] Last data I read about this is on 2017, so this might have changed? But my point still stands out.

AussieWog93 5y ago
I thought the same thing when reading the article. Crypto for this particular problem seems like the proverbial sledgehammer to crack open the walnut.
- usrusr 5y ago
  More like using a flotilla of Kuka industrial robotic arms to open a walnut. If financial literacy is hard, what's crypto-financial literacy?
- EdwardDiego 5y ago
  Cryptocurrency really feels like a solution desperately in need of a problem.
  - masklinn 5y ago
    > a solution desperately in need of a problem. Or a pyramid scheme in need of an excuse / justification.
    - BrianOnHN 5y ago
      Or a massively multiplayer online game of hot potato.
    - shadowprofile76 5y ago
      Please do define how Bitcoin or Ethereum (among others) are "pyramid schemes". Cryptocurrencies have indeed been used for pyramid schemes by specific actors, but then again so has normal money, and many other things. Numerous people on this site who presumably have the intellectual faculties to know better toss that little qualification out from their mouths almost reflexively out of emotional crypto-hate, but have apparently never even read a basic encyclopedia definition of pyramid scheme structure.
      - imtringued 5y ago
        It doesn't matter if it is a crypto scheme or pyramid scheme. The token itself is not a product, the central distributor sells you tokens in a presale and then you have to recruit new members through marketing the token and sell them your tokens. The point is that there is no end goal. The last person to buy the token didn't get chocolate coins that he can eat.
      - EdwardDiego 5y ago
        The current crypto bubbles seem to be working on the "greater fool" theory, same principle can be argued to underpin MLMs - your downline are your "greater fools", and you only make money so long as you (or your existing fools can) can recruit more fools.
      - deleted 5y ago
        [deleted]
  - chii 5y ago
_ink_ 5y ago
The Critisism section of that Wikipedia article paints a rather grim picture of M-Pesa in Kenya. To me it looks like the people could benefit from a decentralized finance system that is run by enthusiasts rather than by turbo capitalists.
- zinekeller 5y ago
  I'm not saying that M-Pesa is perfect but 1) I mentioned M-Pesa because it is the largest one in Africa. There are also smaller players there. 2) While there are problems that is specific to M-Pesa or even conventional currency, looking at the landscape of cryptocurrencies some problems, which in my opinion is inherent in how do you define value, are problems that even cryptocurrency has fallen trap into.
n0mad01 5y ago
Then how come that 57% of Africa's population lacking any form of bank account.
- louwrentius 5y ago
  Because of non-technical reasons: like economical and political reasons. Cryptocoins won't solve those issues, nor can they bypass them.
- zinekeller 5y ago
  ... mainly things that aren't even fixable by cryptocurrency? - Wars. Most people in warzones don't want to hold a bank account because it is very unreliable. Cryptocurrency won't solve that problem, in fact it will exacerbate the problem because of your phone or computer is damaged it's game over[1]. Also, how do you even transact when you don't have any form of communication? - Actually don't have anything to bank on. Their money is just enough to survive, so they can't even bank, regardless of its form. Giving cryptocurrency is often a proposed solution, while forgetting that regular currency works fine too in these situations. - Cultural differences. Most, to be honest, don't want to depart their money to someone they don't know. They were introduced to money just a generation or two ago, so they are relatively new here. Good luck convincing that cryptocurrency is trustworthy in a way that can be easily understand. [1] I mean you could write them on paper, but that's really stretching it, mainly because you need a computer to execute transactions.
3np 5y ago
(I don't feel I'm expressing myself well here, but bear with me:) Something that tends to be underappreciated is the risk associated with contemporary mobile payments solutions. Both the individual and the local economy become incredibly reliant on a small number of private companies. For more well-off individuals who can spread their risk ad easily switch providers, this is much less of a practical risk and therefore are likely to shrug off. They also tend to have access to providers with human support and better platforms. Consider also that for multi-national providers, they become affected in new ways to foreign domestic and international policies and politics. These are just some ways in which people become serfs, at real mercy of the whims and fate of politics and businesses. Last week, thousands of people who had Coinbase accounts in Japan are now forced to close them due to them now only being available for Japanese citizens (as opposed to residents). This is probably not more than an annoyance for most of those affected, but transfer that to migrant populations and mobile banking in Africa and things get dark pretty quickly. Cryptocurrencies (when done in a way that liberates the user as opposed to being wrapped in centralized fintech) break this dynamic completely.
- zinekeller 5y ago
  > Cryptocurrencies (when done in a way that liberates the user as opposed to being wrapped in centralized fintech) break this dynamic completely. Now, tell me how to do this exactly? (At least a general sketch?) Because I really think that this is really not a problem that can be seen with cryptocurrency, but rather with how societies work, which is hard to solve. I don't want to favour one or the other, but societal problems are something that require all of the cogs are working. Even if I assume that people are willing to use cryptocurrencies, oppressive governments can seize digital gadgets out of their hands, much as they can block transactions. I also don't have a solution to this unfortunately, and I feel that this is unsolvable.
  - lowkey 5y ago
    See Bitcoin’s BIP-39. With crypto, if I can remember 12 words I can freely transport my life savings anywhere in the world and no government can seize my wealth without torturing me into giving up my passphrase. Can you share a similar strategy for refugees using fiat, gold, real estate, stocks or bonds?
mrtksn 5y ago
There's other groups of people who have access to money and tech but lack access to banking: persecuted people, financially ruined people or people with irregular documents. 1) persecuted: For example, a religious cult grew to require power in the government in Turkey, clashed with the official government and even tried a military coup and failed. Following the coup, those with direct involvement to the coup went to jail and anyone known to be associated with the cult lost access everything and even their bank accounts were closed(they had a regular Banking institution that was seized) and other banks often refused to open an account for those who were associated with the cult. As a result, they started using money transfer services that are not banks and keep to money in cash. 2) financially ruined: People who screwed up or got unlucky in something and lost everything. Many would work and do business outside of the official channels and as a result they don't want to keep the money in traditional institutions because the money can be blocked or seized due to their financial situation. Also, they won't be able to get any benefit of a bank, so all they need is a way to keep and transfer money. 3) irregulars: Those are usually immigrants who entered a country trough illegal ways or overstayed their visas. In most places, they wont be able to provide the documents to open a bank account or even get a TV subscription but they will be working and making money for many years until they sort out their situation. They will need ways to get payed and pay bills, rent etc. Therefore, "unbanked" doesn't really mean too poor, many times it means "unserviceable clients". The "decentralised" aspect can actually mean no one is left out since the usreviceability of those people come from the central government in the region.
- zinekeller 5y ago
  You have good points here, and this reminds me of MasterCard getting giddy with pornographic transactions, even in areas where it is fully legal. However, I think that cryptocurrency will only solve 3) in your list. For 1), they often seize everything, to the point that they seize computers and phones. Even if they are smart to have a backup, I'm pretty sure that they will try to hoover up anything and everything, even regular currency. For 2), I think that this is a societal problem, really. In France (as an example), you are entitled to a bank account regardless of your status, that even means if you have been convicted of money laundering. On the flipside, and I am assuming to use cryptocurrencies like Monero which makes transaction tracking harder, if you are really wanted you could end up in situation that I described on 1).
api 5y ago
Conventional currency can do anything cryptocurrency can do with far less overhead and usually less complexity… if you can trust someone. The problem is that centralized trust creates moral hazard and over time tends to be abused. Abuse of centralized trust can be incredibly destructive both financially and in humanitarian terms. To me the key question is which is cheaper? Is it cheaper to run cryptocurrency with all its overhead or is it cheaper to use faster cheaper simpler centralized systems and “eat” corruption and abuse since those represent the hidden costs of those systems. The answer differs depending on which society you are evaluating and it’s corruption index. It’s not the unbanked that represent a hidden base of cryptocurrency users. It’s those that reside in kleptocracies and failed states.
panarky 5y ago
The story is bigger than just in-person payments, it's also about remote payments, cross-border transfers, and savings. Sure "conventional" paper currency is already a good solution for in-person payments, but it doesn't work for remote payments, international transfers or savings. Cashapp has compelling answers for remote domestic payments and savings in the US, and TransferWise is great for international transfers among wealthy nations. These three are the use cases we're seeing blossom in El Salvador where Cashapp and TransferWise aren't available. I suspect this is an Innovator's Dilemma situation, where crytpocurrency solutions are honed and adapted in emerging markets, then eventually compete with established players in rich nations.

pudo 5y ago

Towards the end, the author claims that the benefit of crypto will be to teach people financial literacy. Not only is that a little bit like teaching people responsible drinking by bringing them to the Oktoberfest, I'm also not sure all the people who do not have bank accounts are really going to use their late-model iPads to watch CryptoBroTube to learn about stablecoins and NFTs... Nominating this post for the "hand-waving argument of the year" awards.

laurentdemarez 5y ago
I don't think this is what the author meant. I think the key here is that it's easier for people to obtain financial literacy because crypto is more accessible than the current financial system.
- hammyhavoc 5y ago
  Can you explain how it is more accessible? Grandma isn't doing crypto.
  - kibbleble 5y ago
    How is email more accessible than Usenet? Grandma isn't doing SMTP
- lottin 5y ago
  Which is a ridiculous claim, both because 1) crypto is not more accessible, and 2) being able to access more financial services doesn't make you less financially illiterate.
  - 9krxk9xy 5y ago
    How is it not more accessible? To open a bank account in the United States, you have to provide an absurd amount of identification and contact information. This usually includes: >Your name & date-of-birth >Your social security number >Your driver's license and/or passport >A video selfie for some online banks >Your street address >Your email address >Your phone number Some of those items can be difficult acquire and maintain, especially if you're starting from nothing. Additionally, many banks require a deposit, and most if not all online banks won't accept it in cash. Most online banks now also require a closed-source app that will, on Android, most likely also require Google SafetyNet, excluding many custom rom users. The street address requirement is a burden on those who live nomadic lifestyles, as you cannot (legally, iirc) use a virtual mailbox, and you have to depend on friends or family to receive any mail they send you. I attempted to open an account at Ally last month and they denied me because they couldn't verify my identity, even though I'd accurately provided everything they asked me for. I assume it's because I'm not in the ChexSystems database or have no credit history. On the other hand, I can get an open-source bitcoin wallet on my PinePhone and just use it.

sub7 5y ago

Crypto is for the ultra banked. To make profit via speculation. And insider trading. Gross conflicts everywhere. Hope it all burns down.

ejanus 5y ago
Why?
numair 5y ago
> Crypto is for the ultra banked. Sometimes the bottom of the comments stack on HN has the most profound comment in the entire conversation. I think this is a good example. By the way, congrats sub7, you invented the phrase “ultra banked.” I hope the investment banks credit you when it lands in an analyst report.
atc 5y ago
Please back up these sensationalist claims with some evidence otherwise I'll apply "That which can be asserted without evidence, can be dismissed without evidence."

jesussaves 5y ago

https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline... Betteridge's law of headlines is an adage that states: "Any headline that ends in a question mark can be answered by the word no."

beshrkayali 5y ago

> Crypto doesn't care who you are and where you live. Anyone can start with crypto. The only thing you need is a mobile phone and an internet connection that doesn't even have to be especially good. Most people today have both. Even though centralized exchanges such as Binance or Coinbase require you to provide identification documents, crypto wallets require no such thing. Crypto is a solution for anyone who needs to receive or send money anonymously. I think it’s more accurate to say: Crypto is a solution for anyone who needs to receive or send money “privately” (rather than) “anonymously”. The idea that you don’t need documents or to provide additional self identifying information (like name and address) doesn’t necessarily mean anonymity, or (imo) should anonymity be a top priority even (not that that’s not important), but being able to spend and transfer money to places where tradition banking doesn’t operate or without being charged extra is. Whatever mess a system’s/government’s economical plan might lead to, people’s money won’t be tied to it and wouldn’t be affected. Also, you don’t really need a smart phone, any old laptop that can run Linux would do.(which are usually cheaper, more available and function better than a phone)

rose8 5y ago
thanks for the comment. Makes sense to use „privately“ instead of „anonymously“.

jsemrau 5y ago

Not yet. The on and off-ramps are still way too complicated. Getting an account with one of the established banks (a.k.a exchanges) is painful. AML/KYC takes weeks, the user interface is a mess, every turn costs you "fees", trading is dominated by whales when they move their money around to pump some shit-err... alt-coin, and finally getting back into fiat so you can actually use all of the "in-game" currency is slow and expensive again. While I work on a crypto solution through my startup, the current state of affairs has still a lot of room to grow.

bradwood 5y ago
On and off ramps are predicated on the necessity to transfer fiat into and out of crypto. This (some would argue) is just an intermediary state before _everything_ is crypto. In El Salvador, there is no need to off-ramp fiat into BTC...
- jsemrau 5y ago
  Yes, I'd hope that. At some point I'd like to buy milk with Banano's I earned from watching JungleTV.
- davidgerard 5y ago
  > In El Salvador, there is no need to off-ramp fiat into BTC... This is a functionally incorrect description of how the system is working there, or doesn't. In practice, the bitcoin systems there are tremendously unreliable, and the populace hates everything about it. I wrote this about how it's going: https://archive.is/mJY30 https://archive.is/mJY30 You could argue that none of what went wrong with it is "bitcoin" per se - but then, the "bitcoin" system that El Salvador actually has doesn't resemble what Nakamoto proposed in any way.
  - el-salvador 5y ago
    I went to a shopping earlier earlier this week in El Salvador, and spoke to one of the cashiers about their experience with BTC while shopping. "We have two Bitcoin payment processors, one from a private bank and another is the state owned wallet. We have had only two clients attempting to pay with bitcoin and both transactions failed. The state owned one has been down for most of the week, and the private bank app can't receive payments from the state owned one".

davidgerard 5y ago

This is ridiculous crypto pumping. None of this works unless the world already runs on crypto. And not even El Salvador actually does that, because the populace hate the bitcoin system, the official payment network is completely unreliable, and the unofficial wallets don't have the fees subsidised. The most common issue with "banking the unbanked" is a lack of sufficient documentation. This is not a problem in El Salvador, because they have a national ID card, and you can get a basic bank account with that. And yet, only 30% in El Salvador have a bank account. What does crypto do about that? What need does crypto fill that the existing basic accounts are failing to? I wrote a book chapter about this crypto marketing buzzphrase. It's been a common buzzphrase in bitcoin and other cryptos since 2013 - and zero of these people have ever given a joined-up account of how this is supposed to work in practice. Not even Facebook, when they put banking the unbanked as a key advantage of their proposed Libra cryptocurrency. https://davidgerard.co.uk/blockchain/2021/02/12/libra-shrugged-chapter-6-banking-the-unbanked/ https://davidgerard.co.uk/blockchain/2021/02/12/libra-shrugg... "Banking the unbanked" is a complex problem, and crypto addresses none of the hard bits.

louwrentius 5y ago
100% Agree. Frankly, I think this article doesn't belong on HN in any shape or form. It's just people shilling left and right to pretend that cryptocurrencies will be a thing. They aren't and the will never be, because they can't. Cryptocurrencies will make few people rich, but most people, the ones too ashamed to admit it, will lose it all and then some. Ask yourself: where does the money come from? Answer: that lambo is paid with other people's money. For every 'lambo driver', there are a thousand suckers who lost. And had to lose to pay for that lambo. I write all of this because I think cryptocurrencies are asinine in every possible way. They play on every weakness humans may have and they undermine our environment and our societies, without anything in return. And let's be totally honest about this: it was never about banking the unbanked. It was always about one thing, and one thing only: getting rich, no matter the consequences (for others).
- ben_talent 5y ago
  Hey I reposted this article The conclusion of the article says: "... it's not a magical solution. The reasons for financial exclusion are rooted in deep inequality" What kind of articles do belong on HN?

Ronziee7251 5y ago

There's probably technologies that are easier to use to solve the unbanked problem. What I find interesting about the article is that it seems to acknowledge this problem. It's doesn't seem like a "crypto is the solution" article. Crypto is inclusive in the sense that anyone can participate, but exclusive in the sense that the knowledge barrier is really high. Does anyone know about any kind of project that teaches young people about financial literacy?

louwrentius 5y ago
The 'unbanked' problem isn't a technical issue in the first place.

flixic 5y ago

Despite benefiting tremendously from crpyto, I don’t believe this narrative. The article mentions the core problem: being your own bank is a HUGE risk. I can accept that risk and deal with complex security mechanisms I have to maintain to both protect my own bank and keep it accessible. But a good security guide for crypto is 20-30 pages and requires serious cryptographic understanding. Currently, I can’t expect that from average users. Everything can be solved over time. Social recovery wallets and user-friendly hardware might become mainstream. But I don’t see that happening in the next 5-6 years, and I fully expect CBDCs to be far along in that time. Then, countries will be a lot less motivated to promote crypto for the unbanked.

redka 5y ago

As usual, here on HN, any time something is posted that relates to cryptocurrencies the discussion gets filled with negativity and even, seemingly unprovoked, outright hostility toward the idea. Overall HN (in my opinion) has a very good quality of discussion and I often read the comments before opening a link or even just for the sake of it. Nevertheless when it comes to cryptocurrencies that assumption goes out the window and I'm bound to see overly negative attitude to the point of irrationality. It's surprising to me how, out of all the places, HN would be the one where that's the case. I wonder if anyone has any theories on why that is? I dare to assume that it's not just my ignorance of some fundamental, unrecoverable flaw in the concept itself that motivates some to speak against it with such certainty. It might be partly a lack of understanding of the multitude of available options (and even those not yet conceived) and how different - "cryptos" can be from each other but I don't understand how that would translate to people writing unprovoked, unsubstantiated claims or even just unrelated but unhelpful, overly negative remarks. Is it some negative experience someone had that traumatized them? Why HN has this problem?

ObamaBinSpying 5y ago
Maybe they are sorry they missed out on the run so far (being in the tech. field).
shimonabi 5y ago
Maybe smart people are overrepresented on HN. Most of the crypto-bros I know haven't written a single line of code in their life.
ilammy 5y ago
Not everyone registered is posting on every topic. Not everyone having an opinion is posting in the topic they read. Making unsubstantiated claims is easier than laying down concrete arguments. You quickly run out of pearls to throw before the swine. “Venting” is more socially acceptable than “preaching”. And there is a matter of customs and culture: people see that badmouthing happens more often than singing praises, and so the cycle continues. HN is evidently the place where you don’t often see positive discussions of the merits on the front page, so that’s exactly what you see, and even if you have something to say you’d rather keep your mouth shut. But you see slandering comments in every topic so if you want to leave another then by all means, feel right at home. All of this does not even take into account whether there are any technical merits worthy of continued discussion and fervent defense, or everything on this particular topic has been said already and perceived as general knowledge among the literate.

rich_sasha 5y ago

I think saying crypto is better than no bank [for the poor] is a bit like saying loan sharks are better than no loans. In a literal sense that’s definitely true: having more options must be uniformly good, and sometimes you want these options for sure. And yet no one says “yay loan sharks bring financial freedom”, more like “let’s fix poverty and lack of banking”. On balance I think that if you cannot have a bank account then a crypto economy may well be better (but omg the transaction fees), but that shouldn’t be a blueprint for financial advancement.

plebianRube 5y ago

> Consequently, knowledge is the most vital asset to be able to use the financial opportunities that crypto offers. Knowledge about how to use the technology and, more importantly, about cyber security. How can I keep my money safe? Which dapps are good to exchange, loan, and lend money, and how do I recognize scams? I think increasing knowledge is one of mankind's highest aspirations. If after doing research, you find it isn't for you, so much the better. At least you've increased your knowledge. People who knee-jerk react and downvote without having knowledge of the space seems to be the norm here. Crypto isn't something that can be learned in an afternoon, or be taught with a few comments. It is an overlap of technological and social space that is evolving constantly.

shimonabi 5y ago

I'm just reading the book "Attack of the 50 Foot Blockchain" by David Gerard. https://www.goodreads.com/en/book/show/35525995-attack-of-the-50-foot-blockchain https://www.goodreads.com/en/book/show/35525995-attack-of-th... It was published in 2017, but lists all the false arguments the author of this article makes. Even M-Pesa, mentioned in a lot of replies of the commenters, is mentioned.