How cryptocurrency could help tackle global income inequality

Over the past few decades, the inequality of wealth distribution globally has become all the starker.

For example, as of 2022, the top 10% of Americans hold nearly 70% of US wealth. This means that 90% of the country only takes home 30% of the wealth. South Africa is another example, with the top 10% taking home 65% of the wealth.

Many citizens also lack access to general banking as well as high-class financial services (i.e., services limited to accredited investors) that are readily available to the more well-off residents. Cryptocurrency can help to reduce wealth disparity by providing users with access to a means to earn, store, receive, send and invest their money. This analysis looks at how cryptocurrency can help close the gap regarding income inequality.

How can crypto solve income equality?

Cryptocurrency gives users easier access to financial tools and a more affordable method of money remittance. 

Many people in developing nations rely on their family members abroad to send money back to help with living expenses. Money remittances account for 20-38.5% of the GDP of countries like El Salvador, Haiti and Tonga. United States dollar-pegged stablecoins like USD Coin (USDC) and Tether (USDT) can ensure that the recipients receive more of the transferred funds without intermediaries taking a cut in the form of transfer fees.

SWIFT transfers can be costly, with some banks charging 3–5%, while others charge a fixed fee of $25-$45. Transfers via Western Union cost $25 on average for online transfers, $2.99–$29.99 via credit/debit card and $7.99 when done in-store. On the other hand, stablecoins like USDC can cost $3–$5 to send on Ethereum and less than a penny on BNB Smart Chain, Tron and Cardano blockchains.

While saving an extra $20–$44 on transaction fees might not seem like much to many people, this makes a big difference for people in developing countries or with lower incomes. For example, the average monthly salary in Venezuela is roughly $25.

These savings make it possible for people to make a better living from family members working overseas. In addition, family members will also be able to send money back home more frequently due to the very low fees and fast transaction times.

Ben Caselin, head of research and strategy at AAX — a cryptocurrency exchange — told Cointelegraph:

“Bitcoin, but also stablecoins, generally provide more accessibility than traditional banks, especially in emerging markets where large populations often…