HAQQ Insights: Impact of Stablecoins in Developing Economies

Given the volatile nature of most cryptocurrencies, stablecoins have emerged as a reliable tool in the realm of digital assets, making them one of DeFi's most sustainable use cases. Notably, the Tron network leads cross-border stablecoin payment, conducting billions of dollars in weekly transaction volume, surpassing the BNB Chain. Impressively, over 50% of Tether’s USDT issuance occurs on Tron, and in Q4 of 2023, stablecoin transaction volume on the network amounted to $1.2 trillion, about one-third of the global stablecoin volume. Unlike volatile cryptocurrencies like ETH, BTC or even ISLM, stablecoins maintain a fixed value, typically pegged to fiat currencies or backed by other assets or commodities like gold.

Stablecoins combine the flexibility and convenience of blockchain transactions with the price stability of fiat currencies, allowing them to act as a bridge between the traditional financial system and the digital economy. This is particularly important for individuals in developing nations like Nigeria as well as Tukey, where access to traditional banking services is limited and currency volatility is a persistent challenge. In these developing economies, stablecoins present the perfect solution to the limitations plaguing traditional financial systems in these regions.

With their stability and low transaction costs, stablecoins can facilitate economic empowerment and financial inclusion, enabling individuals in these regions to participate more fully in the global economy. In this article, we will explore the positive impact of stablecoins in developing economies and how individuals can leverage stablecoins on the HAQQ Network to access halal crypto solutions that address their unique challenges and empower them to thrive in the digital economy.

Stablecoins as a Halal Gateway to Crypto

In developing economies like Nigeria or Mali, traditional financial systems can be restrictive and expensive, especially for Muslims. Most individuals have limited access to banks, and cross-border transactions often incur exorbitant fees. According to a study by the World Bank, sending $200 in 2020 incur an average global cost of 6.8%, and at about 9% in sub-saharan Africa. This high cost unfortunately prices out those who can't afford to use these services. However, the unique characteristics of stablecoins allow them to be used to circumvent these challenges and level the playing field. The stability that stablecoins offer makes them particularly attractive for individuals in developing economies where local currencies can be prone to inflation and depreciation. Here is a typical breakdown of the interchange and assessment fees charged by Visa/Mastercard on cross-border transactions:

The HAQQ Network makes it easy for individuals and businesses in emerging economies to conduct cross-border transactions with stablecoins at near-zero rates. A single stablecoin transfer with the HAQQ wallet costs $0.0003. Stablecoins offer a significantly lower risk profile compared to traditional cryptocurrencies. This aligns with Islamic principles that discourage excessive risk-taking (Gharar). With stablecoins, users have a clearer understanding of the value they hold, making them a more predictable financial instrument. However, fiat-backed stablecoins may present some limitations and potential conflicts with Islamic finance because of the lack of transparency inherent in the traditional financial system.

This is why HAQQ is exploring alternative Sharia-compliant options, like the gold-backed stablecoin. Gold is a tangible asset with historical value and religious significance in some Islamic cultures. Its finite supply and historical stability make it a more reliable store of value, particularly attractive in developing economies battling with currency fluctuations. Gold also presents a more suitable reserve for Muslims seeking halal crypto participation. By offering a halal gateway to crypto through stablecoins, HAQQ empowers Muslims in developing economies to participate in the digital asset space with a degree of stability and adherence to their faith. This opens doors for financial inclusion, allowing them to access faster and cheaper remittances, hedge against inflation, and explore new investment opportunities.

Transforming Developing Economies With Stablecoins on HAQQ Network

A significant portion of the population in developing economies lacks access to basic banking services due to limited access to physical branches or high account maintenance fees. Stablecoins on HAQQ Network provide a low barrier to entry and user-friendly interfaces as an alternative. With a smartphone and internet connection, individuals can hold and manage their finances through the HAQQ Wallet. This means that a farmer in rural Indonesia can store a portion of their harvest earnings in a stablecoin wallet, gaining financial security and access to new opportunities.

Fast and Cost-Effective Remittances

For millions of families in developing economies, sending and receiving money across borders can be a costly and time-consuming process. Traditional remittance services incur series of fees including bank fees, intermediary fees, compliance fees, operational costs and FX rate margins, these cumulate into exorbitant charges that eat into the value of these hard-earned funds. Stablecoins on HAQQ Network can facilitate significantly faster and cheaper cross-border transactions. Transactions are processed quickly and securely on the blockchain, with significantly lower fees compared to traditional methods. This can translate into real savings for families, allowing them to receive more of the support they need.

Store of Value Against Inflation and Currency Fluctuation

Developing economies often grapple with inflation and currency fluctuations, eroding the purchasing power of individuals' savings. For instance, Nigeria's inflation rate for the month of March 2024 was over 33%. Asset-backed stablecoins like a gold-backed stablecoin on HAQQ can act as a hedge against such economic challenges. People can store their savings in a stablecoin on HAQQ Network, protect their value and ensure they retain purchasing power over time. This financial stability empowers them to plan for the future without fearing the erosion of their hard-earned money.

Fostering Local Entrepreneurship and Business Growth

Stablecoins can also unlock new avenues for local entrepreneurship and business growth. For instance, small businesses can leverage stablecoins for faster and cheaper cross-border transactions, facilitating international trade and access to new markets. Additionally, through Sharia-compliant DeFi applications built on HAQQ Network, businesses that struggle to secure traditional loans can access alternative financing options. By easing access to capital and facilitating international trade, stablecoins can play a vital role in stimulating local economies and fostering business growth.

The potential benefits of stablecoins on HAQQ Network extend far beyond these initial examples. As this technology matures, we can expect even more innovative applications to emerge, transforming the financial landscape in developing nations and empowering individuals within the Islamic community.

References

1. Tron weekly volumes surpass BNB Chain and Ethereum
2. Tron settles one-third of global stablecoin volume
3. World Bank study on cross-border fees
4. Nigerian Inflation rate
5. Top 10 Remittance Receiving Countries
6. True Cost of Processing Cross-border
7. Tron poised to lead stablecoins payment tokenization

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