Stellar and PwC publish ‘framework’ for blockchain governance in emerging markets Cryptocurrency scrgruppen

The Stellar Development Foundation, developers of the Stellar network, has released a financial inclusion framework to judge the effectiveness of blockchain projects in emerging markets. The framework was developed in collaboration with consultants PricewaterhouseCoopers International (PwC). to explain In a white paper published on September 25.

Using this framework, the team concluded that blockchain payments solutions significantly increased access to financial products by reducing fees to 1% or less. They also found that blockchain products increased the speed of payments and helped users avoid inflation.

Parameters of the financial inclusion framework. Source: Stiller, PricewaterhouseCoopers.

Some blockchain developers claim that their products can promote “financial inclusion.” In other words, they say their products can provide services to unbanked people living in the developing world. Making this claim has become an effective way for some Web3 projects to obtain funding. For example, the United Nations International Children’s Fund (UNICEF). included Eight blockchain projects I’ve helped fund so far are based on this idea.

However, Stellar and PwC argued in their paper that projects can fail to promote financial inclusion if they do not have a framework for assessing what is needed to achieve success. “As with any technological innovation, the need for strong governance and responsible design principles is key to successful implementation,” they said.

To help strengthen this governance, the two teams proposed a framework for judging whether a project is likely to promote financial inclusion. The framework consists of four parameters: access, quality, trust, and use. Each of these parameters is divided into further sub-parameters. For example, “access” is broken down into affordability, connectivity, and ease of getting started.

Each explanation of a subparameter includes a suggested method for measuring it. For example, Stellar and PwC list “# of CICO [cash in/cash out] Locations within the relevant target demographic area” as a means of measuring the “connectivity” metric. This is intended to help ensure that projects can measure their effectiveness scientifically rather than relying on guesswork.

The teams also proposed a four-stage evaluation process that projects should undergo to solve the problem of financial inclusion. The project should define the solution, target population and relevant jurisdiction in the first phase. In the second stage, they should identify the barriers that prevent the target population from receiving financial services. In the third stage, they should use Level Charts and Guidelines to identify the biggest barriers to user onboarding. In the final stage, they should implement solutions that “prioritize key criteria” to achieve the most effective use of funds.

Stages of implementing the financial inclusion framework. Source: Stiller, PricewaterhouseCoopers.

Using this framework, the teams identified at least two blockchain solutions that have proven effective in promoting financial inclusion. The first is payments. The teams found that traditional financial apps charge an average of 2.7% to 3.5% to send money between the United States and the market under study, while blockchain-based solutions charge 1% or less, based on a study of 12 apps operating in Colombia. Argentina, Kenya and the Philippines. They found that these applications increased access by making electronic payments available to people who could not afford them.

The second effective solution they found was saving. The team claimed that the Argentine stablecoin app allows users to invest in inflation-resistant digital assets, helping them preserve their wealth when they would otherwise lose it.

Related: The Argentine presidential candidate wants central bank digital currencies to “solve” hyperinflation

Stellar Network has been at the forefront of including payments in underserved financial markets. In December, it announced a program to help charitable organizations distribute funds to help Ukrainian refugees fleeing the war. On September 26, they announced a partnership with Moneygram to produce a non-custodial cryptocurrency wallet that can be used in over 180 countries. However, some financial and monetary experts have criticized the use of cryptocurrencies in emerging markets. For example, a research paper published by the Bank for International Settlements on August 22 claimed that cryptocurrencies “have amplified financial risks” in emerging market economies.

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