Emerging markets offer great opportunities for cryptocurrencies

Emerging markets offer great opportunities for cryptocurrencies


  • Many of the most practical uses of cryptocurrencies are in emerging markets, according to Jocelyn Cheng.
  • Cheng says that cryptocurrencies can lower the costs of remittances and open up access to loans in those markets.
  • This article is part of “Master Your Crypto”, an Insider series helping investors improve their cryptocurrency skills and knowledge.

The collapse of cryptocurrencies has significantly reduced the value of assets such as bitcoin and ethereum, but some investors say it also presents opportunities to support companies at the forefront of emerging trends in the Web3 space.

Jocelyn Cheng, CEO of London-based Luno Expeditions, believes many of those opportunities lie beyond the US. Her firm, the venture arm of Luno, a crypto investment firm, has invested in 30 Web3 companies. and fintech in 15 countries, including Nigeria, Kenya, and Pakistan.

Several of Luno’s portfolio companies, including Kotani Pay, a crypto payments startup, focus on clients in emerging markets such as Africa, South Asia and Latin America.

Insider spoke with Cheng about where he thinks crypto apps are poised to grow globally.

This interview has been condensed and lightly edited for length and clarity.

What areas within crypto are the most exciting for you right now?

We continue to see a lot of interest in stablecoins. There was a very public stablecoin explosion, but the main utility for emerging markets is still there. They have become popular not only because they are good on-ramps from fiat currency to crypto, but also because they are, by definition, pegged to a stable asset like the US dollar.

They can help weather price volatility, especially for emerging market investors. Historically, to gain access to US dollars, they would have to incur significant fees. With stablecoins, the benefit is that it actually makes access to the US dollar much more affordable.

What is the use case for stablecoins for the average person in an emerging market?

I’ll give you a personal example, if that’s okay. Many years ago, she lived in Tanzania and rented an apartment. I had a US dollar account in the US and they demanded my rent in US dollars in cash. But since I was in Tanzania, I had to go to the ATM and withdraw Tanzanian shillings from my US dollar account.

That was the only option. I had to pay ATM fees, foreign transaction fees, off-network fees, and had to take those Tanzanian shillings and take them to a local FX dealer only to change them back to US dollars and give them to my landlord. My landlord then took that cash in US dollars and had to do basically the same thing in reverse to deposit it into his local account.

We believe that the benefit of having stablecoins is to be able to streamline that process. We have invested in companies like Caliza, which is a B2B company that provides fintech companies with the infrastructure to offer synthetic accounts in US dollars using stablecoins. A customer can deposit local currency, where it is converted into a stablecoin like USDC, held by a custodian that provides direct access to US banking.

Are there other opportunities you see for cryptocurrencies in emerging markets?

There is a huge opportunity for cryptocurrencies to provide better international payment rails. Remittances are the source of income for 800 million people around the world. I think cryptocurrencies have a really important ability to make remittances faster and cheaper.

In the traditional method, it can take up to five days and, on average, it can cost 7% for a transfer of $200. On the other hand, cryptocurrencies allow the transfer of money in a matter of minutes from one wallet to another. User-to-user fees would depend solely on the transaction fees of the blockchain.

In some of the pilots that we have seen for the use of cryptocurrencies as a means of sending remittances, we have seen that the transaction fees are actually reduced. There is a company in our portfolio called Kotani Pay, which has been testing cross-border temporary worker payments in Kenya. Using crypto, they have reduced transaction fees by 93%.

We have also seen other companies a little more advanced than our initial approach. Other companies like Coins.ph and Aza Finance work in emerging markets and use crypto rails for remittances. They offer a much lower cost: 1% to 4%, instead of the global average of 7%, and they also take minutes to settle instead of five days.

What are the specific benefits that Crypto offers over other technologies?

It streamlines the entire flow. Whether you’re looking for instant settlement or very quick settlement, it avoids the need for the provider to hold huge cash reserves in destination countries.

Ultimately, there is a need for a last mile payment for the recipient. There is a need to, for example, integrate with mobile money or, in some cases, 7-Eleven, wherever the last-mile pickup point for recipients is. So it is critical to integrate with non-crypto systems as well, but crypto provides a faster and cheaper rail for the cross-country part.

This is one of the things we’re really excited about, working with Kotani Pay, the company I mentioned earlier. They do not need internet access to connect to the blockchain. That’s important because in Africa about 50% of people still use basic phones. Therefore, a user does not need to see the cryptocurrencies to get the benefits of cryptocurrencies.

Kotani Pay connects blockchain protocols with local payment channels using USSD services, which are the dominant channels for mobile money payments. So customers with access to those local payment channels can transfer money using feature phones.

Do you think most people will end up interacting directly with cryptocurrencies, or will it just take a backseat even as more people start using these services?

I think for sure we will see more and more people interacting directly with cryptocurrencies globally. But I think we can also design for a world where people have the benefits of cryptocurrencies but don’t need to know what an NFT is or what the private keys of their wallet are.

One thing that we think is quite interesting, but still very nascent, is that cryptocurrencies, more specifically DeFi, provide a more efficient source of capital for funding in emerging markets.

We are seeing some early stories emerge: for example, Goldfinch, which is not a portfolio company but is one we are very interested in. It has enabled more than a million people in companies in India, Mexico, Southeast Asia to obtain loans. , and Nigeria, and has more than $100 million in active loans.

Goldfinch works with existing lending businesses that handle loan origination and servicing, so no real behavior change is needed on the part of the borrower. But then those lending firms can tap into global lending pools using DeFi, mine stablecoins from the pool, and deploy them on the ground in their local markets.

This article is intended to provide general information designed to educate a broad segment of the public; does not provide personalized investment, legal or other business and professional advice. Before taking any action, you should always consult with your own financial, legal, tax, investment or other professional for advice on matters affecting you and/or your business.


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