Introduction: By digitalization, the innovation based on blockchain may make significant progress in the aspect of financial inclusion. However, the occurrence of stablecoins like Libra, VHKD, etc. is thought to further accelerate the increase of financial inclusion.
Recently, Facebook, which is called to have 2.7 billion users, has announced to build a permissioned alliance blockchain and issued the cryptocurrency Libra. The news has caused a sensation in the Internet and traditional finance.
A relatively notable viewpoint is that the occurrence of Libra as a representative of stablecoins will speed up the increase of financial inclusion. Mark Carney, governor of the Bank of England (BoE), also says in his speech, “The digital currency could improve financial inclusion and lower the cost of domestic and cross-border payments. ”
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Inclusive Finance’s Boosting Status
Inclusive finance is also called inclusive finance system. The core is to provide financial services for all social classes and groups effectively and completely, especially for those which used to be overlooked by traditional finance such as rural areas, underprivileged communities in urban and rural areas and micro-enterprises.
Compared to “80/20 rule (Pareto principle)” advocated by traditional finance, the most significant breakthrough of inclusive finance is that, to some extent, it has disrupted the traditional ideology of serving the rich and allowed the disadvantaged to equally enjoy financial services.
Since the United Nations proposed the concept of inclusive finance in 2005, it has been receiving more and more attentions. However, in recent ten years, it hasn’t advanced very well.
1. The development of the Internet and mobile broadband has enhanced the economic empowerment around the world. But there are still a lot of people straying outside the financial system. Those who are urgently in need usually cannot get enough financial services or be restricted. According to the latest The Global Findex, there are 1.7 billion adults globally who still do not own a bank account, at 31% of the world’s population. That means they have no access to any financial services like having savings accounts and credit.
2. Due to the lacking appropriate methods of payment, the poor need to pay a lot more in financial services. For example, they need to pay high APR of payday loans, remittance fees, wire transfer fees, overdraft fees, ATM service fees, etc.
We know that financial services may not narrow the wealth gap, but it can take advantage of the social and economic benefits brought by banks to give the poor a better life, especially in some countries and regions which are fragile or afflicted by conflicts.
Due to the technologies like distributed data storage, consensus system, encrypted algorithm, etc., bitcoin as a representative of cryptocurrencies is believed to have the potential to deal with the availability and credibility problems of financial services. However, the current technology still lacks extendibility and cryptocurrencies still have high fluctuation. Moreover, some projects try to break the current system and dodge the supervision. These are the reasons why some cryptocurrencies are never widely used in the financial system.
So, why is Libra as a representative of stablecoins placed great expectations by the industry and counted as a revolutionary of the current financial system?
Since Libra is projected to be used in 2020, alternatively, we will talk about a more available and popular stablecoin – VHKD.
Four Ways For VHKD To Empower Inclusive Finance
Before the discussion, let’s briefly introduce VHKD.
Like Libra, VHKD is a sort of stablecoin with a feature of stable value, listed and circulating in February 2018. It is anchored with Hong Kong Dollars and strictly follows 1:1 reserve funds deposit, first listed on IDCM exchange.
VHKD is working hard to build a new decentralized blockchain, a low-fluctuation cryptocurrency and a smart contract platform.
1. It is built based on a secure, extendible and credible blockchain;
2. It uses the asset reserve vesting its intrinsic value as backing;
3. It implements DPOS Consensus System. The nodes between can collectively boost the development of this financial ecosystem.
All of them would function together to enable VHKD to create a more inclusive financial system.
1.Build A New Credit Assessment System
For inclusive finance, the fundamental problem is credit assessment. There hasn’t been an effective way to resolve it before. Thus, the industry proposed an assumption about building a credit system through blockchain technology. As two kinds of engineering technology in Fin Tech, the blend of blockchain and credit investigation is not occasional. Blockchain is counted as a kind of contract to deliver values in the framework of the Internet, without a doubt, credit is essential in the process of value exchange. Therefore, the solution of “Blockchain + Credit Investigation” is totally realizable.
For example, VHKD is build based on a secure, extensible and credible blockchain. The users all have their exclusive IDs and personal keys. Within their IDs, each transaction history and some key credit history in finance would be recorded. All the data can be checked from blocks and are valid and unable to be altered.
2.Greatly Enlarge Coverage of Financial Services
The rapid growth of mobile phone users has made it possible to build a multi-scenario payment system.
VHKD payment system can depend on the Internet and blockchain technology. It can expand the coverage of some business like opening accounts, cash deposit and withdrawal, savings and loan, payment and transfer, credit investigation, insurance, settlement and clearing, etc. to different areas in the world, including some rural areas lacking financial infrastructure. Some small and middle-sized companies and general consumers can be benefited from financial services.
3.Reduce Costs of Financial Services, Provide Trading Convenience
For example, commercial banks meet general consumers’ financial demands by building physical network. But the issue of bank notes and the costs of transportation for circulating spend a lot. Moreover, such a way requires lots of workforce and money, which may not be effective.
On the contrary, VHKD, built based on extendible and reliable blockchain, can provide a convenient and cost-effective applied payment scene for consumers, to boost the connection of finance and the real economy and the integration of industry and finance. Particularly, VHKD can be applied widely in the realm of cross-border transactions. Compared to traditional wire transfer and Western Union, VHKD has much lower transaction and time costs. Furthermore, it can trace the remittance in real time, which provides great convenience and security for the development of financial inclusion.
4. Increase Quality of Financial Services and Satisfaction of Consumers
Overall, in the context of new normal economy, future financial services will rely on blockchain technology and develop towards a flattening direction. The radius of financial circulation would be shortened a lot. Some problems to be solved like the difficulty of financing, high entry barriers, poor services, etc. might be overcome by mobile payment and cryptocurrencies.
The rapid growth of cryptocurrencies around the world has its profound historical reasons. Since 2008 USD crisis and 2010 Euro crisis, the international society started to find more credible international currencies. In this case, more than 650 cryptocurrencies including bitcoin (BTC), Litecoin (LTC), ripple (XRP), etc. have arisen in the commodity economy. Since 2014, with the rapid popularization and development of blockchain technology, the central banks and traditional financial institutions globally began to research and develop their own cryptocurrencies.
As a kind of stablecoins, VHKD is anchored with Hong Kong dollars, which can ensure that it will not fluctuate as largely as BTC, ETH and LTC do. Such a feature can fully meet general consumers’ demand for business-blending, secure and convenient financial services.
With the rise of Tech Fin, the issue and circulation of cryptocurrencies have been possible. But with the occurrence of stablecoins like VHKD, Libra, etc., we can imagine all families and companies can acquire a series of financial services at a proper price through stablecoins in the future. These financial services comprise savings, short and long-term loan, lease, proxy, insurance, pension, payment, local remittance, international transfer, etc., which used to be exclusive to those “accepted by banks”.