Why are blockchain applications practical emerging markets?
The Bitcoin surge has put blockchain or distributed ledger technology on every investor’s radar. While market participants remain divided on the Bitcoin boom continuing or going bust, there are very few contesting the growth and potential of the blockchain technology behind it.
While the United States and Europe dominate the blockchain innovation landscape, the scale for its future growth potential could tilt towards emerging markets (EEM) (VWO). With higher banking risks and lower banking penetration, developing economies offer the perfect setting for adoption of blockchain-based financial solutions. In fact, blockchain technology is already impacting the provision of financial economies in selected regions of Asia (AAXJ) (VPL), Africa (EZA), and Latin America (ILF).
Asia has emerged as a key player in blockchain technology
Asia has emerged as a key player in this regard (chart above). The region, for its part, brings together regulatory activism, a dynamic technological/fintech ecosystem, the collaboration of industry and entrepreneurial players, and sustained access to venture capital, which is key for any economy that wishes to leapfrog on innovation. Over the years, Asia’s share of global Bitcoin (ARKW) (ARKK) and blockchain deals has risen from 8.5% (2013) to 22.7% (2016), according to data provider CBInsights.com. At the same time, North America’s dominance has reduced from 78.7% to 49.2% over the same period.
Moreover, an increasing number of emerging and frontier (FM) (FRN) market companies are now dominating the Bitcoin and blockchain space (see chart above). Asia especially, with its forward-looking regulatory environments, is steadily emerging as a leader in the testing of, and investment into, blockchain technology.
Leading the blockchain-based solutions for the financial services industry
Asia is currently the leader for emerging markets in blockchain-based solutions for the financial services industry. Markets such as China (FXI) (YINN) and India (EPI) in particular have facilitated the adoption of the technology by massive digitization of payment solutions. Cryptocurrency is already being tested and adapted to facilitate trade finance, and the technology is being levered to improvise on processes such as e-proxy voting, land registry management, and supply chain management.
In the next article we’ll take a quick look at the current state and future potential of blockchain technology in emerging economies such as Asia, Africa, and Latin America.