Technology that could revolutionize Southeast Asia’s economy

Regulators in Southeast Asia are getting tougher on digital assets like bitcoin and other cryptocurrencies. 9thth Or in August, Thai Finance Minister Arkhom Termpittayapaisith announced plans Stricter rules for platforms and exchanges Provide digital asset trading. This follows Singapore’s pace Expanding its own regulations marks a potential change to its formerly business-friendly environment. To some extent, these are just part of a global trend towards increased government scrutiny of digital asset markets following their sudden and sustained collapse. However, especially in Southeast Asia, regulators should proceed with caution. Overregulation could stifle a promising industry whose innovation could bring prosperity to millions by simplifying remittances.

Remittances are important globally, but even more so in regions with booming unbanked populations, such as Southeast Asia, where latest estimate established over 70% of the population No bank account. 2021, Remittance flows totaled $597 billion. According to the World Bank, Greater remittance flow More than all other capital inflows from all countries in the region combined.Remittances flow even during the worst of the COVID-19 pandemic 5.2% increase. Without the flow of capital from overseas family members, millions of families in Southeast Asia would be destitute. Remittances are used to pay for food and medicine, as well as household and education expenses. Any long-term development plan for the region must include remittances as an important factor.

Importance of remittance

Despite the importance of remittances, the flow of remittances is still limited by two main barriers: cost and speed.$200 remittance may be generated The average fee is between 5% and 9.3%, according to World Bank. This cost is too high to go straight out of the pockets of some of the poorest people in the world. Long wait times to receive remittances also directly hurt those who could at least afford it.A standard remittance transaction task up to five days – In the case of sudden medical bills, for example, this delay can mean the difference between families that are heavily in debt or trying to pay for the medical bills of a loved one.

The high fees and slowness of remittances are largely caused by regulation and the structure of the global financial industry. International capital controls and anti-money laundering regulations added to multiple intermediaries serve the very real purpose of preventing organised crime and illicit trade, but also make millions more impoverished.

In response, workers and their families are increasingly turning to blockchain technology.For example, in the Philippines, cash remittances account for more than 9% of GDP, cryptocurrency wallets are becoming the tool of choice for such transfers.In Vietnam and the Philippines, 21% and 20% of the population Report Have used or have used cryptocurrencies, respectively.This is a global tree When sending money with cryptocurrencies, and their use Global growth of 900% last year.

Cryptocurrency as a remittance tool

although cryptocurrency They are not by themselves a perfect solution for remittances – they are unstable and complex – they are just a use of the underlying blockchain technology. Blockchain has almost revolutionary potential to change the future of global remittance, especially in Asia. It works by storing blocks of information as “blocks” that are added to a “chain” of transactions, which are then distributed across a network of computer nodes for verification. For more information to be added to the chain, all nodes must verify the information. This makes the blockchain very trustworthy.

This trustworthiness is important for remittance finance. A common problem for immigrant families in Southeast Asia is the lack of access to financing. Domestic households lack documentation to prove to lenders that they are not at credit risk if the primary earner is abroad in the foreign employment system. Without funds, families cannot apply for loans for life-changing investments such as education or emergencies.However, if both OECD and Asian Development Bank Decentralized blockchain reportedly allows workers abroad to simply and accurately record their financial and labor status without even needing to access ID. Due to the security of the blockchain, these records are trusted by the banks of the country. Using these records, for the first time, their families can invest in loans to help them escape poverty, possibly with the help of so-called decentralized identifiers.

Blockchain can also make existing remittance systems faster and cheaper. Currently, intensive anti-money laundering Know Your Customer (KYC) regulations are one of the main reasons for the high cost and slow speed of remittances.

The impetus given by blockchain technology

Blockchain-based technology, however, allows customers to use digital fingerprints as unique identifiers and stored on a digital chain that can be securely distributed to all financial institutions at once without having to go through multiple checks.recent OECD report Explains how this technology can fundamentally reshape remittances.

This is a nascent industry – innovations are yet to be discovered and some problems will be solved. Despite this potential, many governments are reluctant to take the risk of unleashing the power of this technology. China, Myanmar, Bangladesh, and Cambodia have formally or effectively banned the use of cryptocurrencies, inadvertently negatively impacting the role blockchain plays in transforming their economies. Even if not all Southeast Asian countries have so far followed their example, The Economist expected to be restricted Continue to grow across the region over the next five years.

Of course, some level of regulation is both expected and desirable. However, the current positions of many of our governments go too far. By being skeptical of all cryptocurrency companies — and more importantly, blockchain developers — we could be cautiously killing the industry. While not perfect at the moment, innovation requires a degree of imperfection and risk-taking. And, if an innovation is realized, it could boost remittances and prosperity across the region.

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