(Related to the Making the Connection on page 482 ) In 2015,...

(Related to the Making the Connection on page 482 ) In $2015,$ some business startups were offering the service of transferring money in the form of bitcoins among in- dividuals and businesses in developing countries. At the same time, an article in the Wall Street Journal noted that in the United States, "Most ordinary consumers remain wary of using an unproven, six-year-old digital currency that many associate with illicit drugs, extreme price fluctuations and security risks." Why might using bitcoins be more attractive to individuals and firms in developing countries than to individuals and firms in the United States?

(Related to the Making the Connection on page 482 ) In $2015,$ some business startups were offering the service of transferring money in the form of bitcoins among in- dividuals and businesses in developing countries. At the same time, an article in the Wall Street Journal noted that in the United States, "Most ordinary consumers remain wary of using an unproven, six-year-old digital currency
that many associate with illicit drugs, extreme price fluctuations and security risks." Why might using bitcoins be more attractive to individuals and firms in developing countries than to individuals and firms in the United States?

Key Concepts

Financial Inclusion

Financial inclusion is the effort to make financial products and services accessible and affordable to all individuals and businesses, regardless of their traditional access to banking. In developing countries, where a significant portion of the population may be unbanked or underbanked, digital currencies offer a means to participate in the global economy by providing alternative, accessible channels for holding, transferring, and receiving funds.

Remittance and Cross-Border Transactions

Remittance involves transferring money across borders, typically from migrant workers to their families in their home countries. Digital currencies like bitcoin can reduce transaction costs, bypass intermediaries, and expedite the transfer process. This efficiency can be especially attractive in developing nations where traditional remittance services might be expensive, slow, or unreliable.

Digital Currency

Digital currency refers to money that exists in electronic form and is not issued by a central authority. It leverages cryptographic techniques to secure transactions and control the creation of additional units. This concept is central to understanding why alternative money systems like bitcoins can operate independently of traditional banking systems and government oversight, making them particularly appealing in regions with less developed financial infrastructures.

Currency Stability and Economic Trust

Currency stability and economic trust play crucial roles in determining the attractiveness of various financial instruments. In regions with hyperinflation, volatile local currencies, or unstable financial institutions, a decentralized digital currency can provide a more reliable store of value and medium of exchange. In contrast, stable economies with trusted financial systems, like the United States, may see less appeal in transitioning to a new, less proven form of money.

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