Digital money systems built on blockchain networks must retain the qualities of physical money to attract more users in developing countries – and they must be able to do so without regulatory restrictions, according to Circle CEO Jeremy Allaire.
In a round table held at the annual meeting of the World Economic Forum, entitled “Remittances for Recovery: A New Era of Digital Money”, Allaire discussed all the characteristics that make physical money an ideal medium of exchange. There’s a reason “cash is king,” he said, referring to the portability of physical money, its privacy and the role it plays in ensuring individual sovereignty.
“Cash is a really good product […] People like cash. It’s private, it’s secure, it’s a bearer instrument, it provides final settlement between you and a counterparty,” he said, adding:
“There is a lot of energy in the world directed at removing the features that make cash so powerful. There is a reason why people in countries around the world prefer cash to mobile money, because it gives them more self-sovereignty, it gives them more economic freedom.
The comments of Allaire were responding to Asif Saleh’s observation that remittances through mobile wallets are limited by the lack of adoption of digital technologies by the country of destination. Saleh is the executive director of BRAC Bangladesh, a non-profit organization aimed at fighting poverty.
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“A lot of the political and regulatory issues that limit the power to move money have to do with stripping people of their economic freedoms,” Allaire said. “We have to think about solving these problems by building models that actually provide forms of digital money that have the characteristics that make cash attractive to people.”
Something as simple as a SIM card allows people from all over the world to participate in the global Internet. That mobile identity, Allaire said, should also allow people to incorporate digital wallets where they can send and receive cryptocurrencies like USD Coin (USDC).
“There are models that can make this work […] Policy makers and regulators have to adapt to it instead of trying to make everyone adapt to their limitations.”
Remittances provide low-income countries with relatively stable capital flows, as migrants send money back to their families. Remittances are estimated to represent approximately 4% of the gross domestic product of low-income countries and approximately 1.5% of the GDP of middle-income countries. Decentralized finance advocates claim that DeFi could reduce remittance fees by billions of dollars annually.
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