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Last Updated : Jun 17, 2017 01:08 PM IST | Source:

Financial inclusion can be a reality with virtual currency

With virtual currency, the internet is fast bringing about change in the financial industry

Sandeep Goenka

We live in a hyperconnected digital world today, where literally everything is fuelled by the internet. Given the virtual world that we have built as a parallel to the real world, virtual currency represents a new asset class. Virtual currencies or a “cryptocurrencies” like bitcoins are created through a process called “mining” through advanced computer software programmes. Bitcoin today is a pan-global means of exchange that happens in between computer wallets and does not have any physical form.

At the same time however, each transaction can be tracked and verified because it is based on blockchain technology. Blockchain provides an authentic audit trail that make transactions irreversible and transparent. Each bitcoin holder is known by an account (computer wallet ID) and transactions can be made across the globe. This results in cost savings as there is no cost of currency conversion or other transaction fees.


Global experiences with virtual currency

With virtual currency, the internet is fast bringing about change in the financial industry. Virtual currency is an ideal intersection of finance and technology and the day may not be too far away when bitcoins are a part of national reserves of a nation. Already, mining for virtual currencies is a multi billion dollar industry in US, China and Scandinavian countries.

Further, virtual currencies are becoming a rage in countries such as Switzerland which is at the forefront of becoming a bitcoin powerhouse. Asian financial hubs such as Singapore and South Korea too are not too far behind, with sandbox programmes for bitcoin businesses are being introduced in fintech hubs. With India aspiring to be a digital and financial hub in the lines of countries like London, Hong Kong and Singapore, encouraging virtual currency operations and usage will enhance its chances of increasing its global footprint as a financial hub

Here are some areas where virtual currency can make a significant difference for India:

 Remittances can be cheaper and easier for India

India has the world’s largest inward remittance market which is more than 70 billion dollar per year. Despite the large demand for remittances, the current remittance business model is complicated and inefficient. Companies dominating the remittance business are non-Indian and conducting business for them requires the setting up of an end to end payment channel from the country of origin to India.

Due the lack of competition and high cost of setting up payment channels, that transactions costs charged by such companies are as high as 5-20 percent of the amount being remitted. Further, under the current procedure remittances below 200 dollar is nearly impossible to carry out. It is here that virtual currency can make a large difference as it can not only eliminate currency conversion charges but other transaction fees as well. Further, unlike cash, there is more transparency in transactions with the chain of historical transactions available. Countries like Philippines have acknowledged this potential of bitcoins and are now allowing local companies to use bitcoins for remittances.

 Financial inclusion can be a reality with virtual currency

The internet has touched the lives of Indians like never before with smartphone availability and internet penetration at a peak. At this crucial juncture, it makes immense sense to explore the potential of virtual currency to serve the unbanked with modern financial services. Opening cryptocurrency accounts is far easier than opening bank accounts. It is efficient, instant and free and is thus much more economically viable than traditional payment networks.

Bitcoin is already made a significant impact on countries focussing on financial inclusion efforts. Case in point is a country like Kenya where accommodating regulatory landscape and high mobile capacity has given a veritable boost to the financial inclusion efforts of the nation. Thanks to its growing mobile penetration lower income groups in India can significantly gain from low-cost services that virtual currencies can provide, thus making further progress in its financial inclusion efforts.

Virtual currencies represent a new global asset class and are growing in global value. Nations that do not recognise the potential of virtual currencies, run the risk of cutting short potential economic gains and limiting reserves of a global assets in the near future.

Author is Co-founder and COO of Zebpay

Disclaimer: The views expressed by investment experts on are their own and not that of the website or its management.

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First Published on Jun 17, 2017 01:08 pm
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