06
How to drive broader adoption
06
How to drive broader adoption
Innovative solutions based on digital assets and blockchain-based applications have great potential to support displaced MSMEs. Yet, a number of significant barriers remain to achieving wider adoption of such solutions across EMDEs globally.
This includes but is not limited to:
- Low levels of digital and financial literacy needed to build understanding of and trust in such solutions
- Inadequate digital financial infrastructure
- The absence of supportive regulatory frameworks and legal certainty
Digital and financial literacy
In Sub-Saharan Africa, two-thirds of the population are reported to be financially illiterate, while according to the World Bank’s Global Findex, in emerging economies, about half of account owners who did have access to bank or mobile money accounts made no digital payments to merchants. 89,90
Recent work by the OECD has found that MSMEs can additionally benefit from blockchain technology in relation to investment needs and technological developments.91 However, they also highlight that for full uptake of the available technological advancements covering digital assets, increased trust in, and understanding of, the available technology is needed. Trust is widely recognised as one of the main drivers of individuals’ intention to take up and continue using such services.92
While low levels of financial literacy are well documented, there is a digital element to financial literacy that is also a prerequisite for the trust needed to increase the use of digital assets and blockchain-based solutions in EMDEs. According to the Alliance for Financial Inclusion (AFI), digital financial literacy, as a concept, encompasses the domains of financial literacy, financial capability, and digital literacy.93 These enable individuals to make informed financial decisions tailored to their economic and social situations, acting in their best financial interest.
The absence of digital financial skills and literacy significantly affects the adoption, usage, and promotion of digital financial services, subsequently impacting the financial inclusion and well-being of consumers and businesses.94 Providing citizens with the information and tools they need will help them understand and rely on a wider range of digital providers and their offerings.95 Further work needs to be undertaken to ensure that people in EMDEs, who have most to gain from new technologies and the growth of digital financial services, are supported to ensure that they have the digital financial skills that they need.
Adequate digital infrastructure
The digital infrastructure scene (telecommunication antennas, internet cables, ability to host data centres) is very fragmented, especially in EMDEs. On data centres for example, South Africa and Nigeria already have multiple data centres that are up and running (31 and 11 respectively)96 , while the Central African Republic has yet to set up a single national data centre.97 When looking at more common digital infrastructure such as internet coverage some of the countries are far more advanced, while others remain far behind.98
The examples in India, Kenya and Brazil where the government has invested in digital infrastructure, have demonstrated the potential of digital solutions in places with less developed banking structures. While these have been government funded initiatives, generally though, in relation to telecoms, most of the funding comes from the private sector. The policy debate tends to focus on the policy levers which might be used to boost this.
There are various public-private partnerships both in developed and emerging economies. For example, the EBRD has co-invested in infrastructure projects in Ukraine jointly with the International Finance Corporation (IFC), where they have co-financed a Ukrainian-founded global online language learning platform, to helped bolster Ukraine’s tech sector. EBRD also (co-)invests in projects to provide sustainable digital infrastructure, for example in mobile tower infrastructure in Western Balkans that will in turn support the further development of other digital technologies.99 These partnerships bring public funding and private sector expertise together in designing and enhancing digital infrastructure.
Innovative solutions based on digital assets and blockchain-based applications have great potential to support displaced MSMEs. Yet, a number of significant barriers remain to achieving wider adoption of such solutions across EMDEs globally.
This includes but is not limited to:
- Low levels of digital and financial literacy needed to build understanding of and trust in such solutions
- Inadequate digital financial infrastructure
- The absence of supportive regulatory frameworks and legal certainty
Digital and financial literacy
In Sub-Saharan Africa, two-thirds of the population are reported to be financially illiterate, while according to the World Bank’s Global Findex, in emerging economies, about half of account owners who did have access to bank or mobile money accounts made no digital payments to merchants. 89,90
Recent work by the OECD has found that MSMEs can additionally benefit from blockchain technology in relation to investment needs and technological developments.91 However, they also highlight that for full uptake of the available technological advancements covering digital assets, increased trust in, and understanding of, the available technology is needed. Trust is widely recognised as one of the main drivers of individuals’ intention to take up and continue using such services.92
While low levels of financial literacy are well documented, there is a digital element to financial literacy that is also a prerequisite for the trust needed to increase the use of digital assets and blockchain-based solutions in EMDEs. According to the Alliance for Financial Inclusion (AFI), digital financial literacy, as a concept, encompasses the domains of financial literacy, financial capability, and digital literacy.93 These enable individuals to make informed financial decisions tailored to their economic and social situations, acting in their best financial interest.
The absence of digital financial skills and literacy significantly affects the adoption, usage, and promotion of digital financial services, subsequently impacting the financial inclusion and well-being of consumers and businesses.94 Providing citizens with the information and tools they need will help them understand and rely on a wider range of digital providers and their offerings.95 Further work needs to be undertaken to ensure that people in EMDEs, who have most to gain from new technologies and the growth of digital financial services, are supported to ensure that they have the digital financial skills that they need.
Adequate digital infrastructure
The digital infrastructure scene (telecommunication antennas, internet cables, ability to host data centres) is very fragmented, especially in EMDEs. On data centres for example, South Africa and Nigeria already have multiple data centres that are up and running (31 and 11 respectively)96 , while the Central African Republic has yet to set up a single national data centre.97 When looking at more common digital infrastructure such as internet coverage some of the countries are far more advanced, while others remain far behind.98
The examples in India, Kenya and Brazil where the government has invested in digital infrastructure, have demonstrated the potential of digital solutions in places with less developed banking structures. While these have been government funded initiatives, generally though, in relation to telecoms, most of the funding comes from the private sector. The policy debate tends to focus on the policy levers which might be used to boost this.
There are various public-private partnerships both in developed and emerging economies. For example, the EBRD has co-invested in infrastructure projects in Ukraine jointly with the International Finance Corporation (IFC), where they have co-financed a Ukrainian-founded global online language learning platform, to helped bolster Ukraine’s tech sector. EBRD also (co-)invests in projects to provide sustainable digital infrastructure, for example in mobile tower infrastructure in Western Balkans that will in turn support the further development of other digital technologies.99 These partnerships bring public funding and private sector expertise together in designing and enhancing digital infrastructure.
Enabling regulatory frameworks/ legal certainty
The regulatory environment around digital assets is nascent and globally fragmented as regulators grapple with how to provide effective oversight without the presence of the centralised intermediaries that sit at the centre of the traditional financial system. While some authorities have concluded that certain types of decentralised activities should be covered by existing statutes, others may be in need of specialised new frameworks.100
Globally, there is significant variability between the approaches and stages of developments in various jurisdictions. Some (like Ukraine before the Russian invasion) have not even legalised the use of digital assets, others (like the European Union) have complex new frameworks regulating markets of digital assets that are expected to be further amended and elaborated in the medium-term.
“Globally, there is significant variability between the approaches and stages of developments in various jurisdictions”
Some countries have some regulations in place covering digital assets, while in some other countries activities in such assets remain unregulated but legal. For instance, some European nations outside the EU, such as Albania or Serbia have had frameworks covering digital assets for some years now. Türkiye also introduced a draft bill in May 2024 on the regulation, licensing and supervision of activities in digital assets.101,102,103 At the other end of the spectrum, North Macedonia banned activities in digital assets in 2016. And while Kazakhstan is a big miner of digital assets (around 13% of global Bitcoin), everyday trading, circulation or payments in these assets are mostly banned.
Great disparities in laws and regulations on digital assets exist across Middle East and African countries as well. In Egypt there is no specific law covering digital assets and the Central Bank of Egypt has issued various warnings against them with the latest published in March 2023.104 Other Islamic countries in North Africa such as Libya, Tunisia and Morocco have no regulation in place and the digital assets sector is very restricted.
A basic enabling framework remains an essential prerequisite for engaging users and businesses to increase digitalisation, the provision and take-up of blockchain-based solutions, and to build micro- and macro-economic resilience.
EBRD and Block can look to help address these issues through a series of potential next steps, set out in the next section.
Enabling regulatory frameworks/ legal certainty
The regulatory environment around digital assets is nascent and globally fragmented as regulators grapple with how to provide effective oversight without the presence of the centralised intermediaries that sit at the centre of the traditional financial system. While some authorities have concluded that certain types of decentralised activities should be covered by existing statutes, others may be in need of specialised new frameworks.100
Globally, there is significant variability between the approaches and stages of developments in various jurisdictions. Some (like Ukraine before the Russian invasion) have not even legalised the use of digital assets, others (like the European Union) have complex new frameworks regulating markets of digital assets that are expected to be further amended and elaborated in the medium-term.
“Globally, there is significant variability between the approaches and stages of developments in various jurisdictions”
Some countries have some regulations in place covering digital assets, while in some other countries activities in such assets remain unregulated but legal. For instance, some European nations outside the EU, such as Albania or Serbia have had frameworks covering digital assets for some years now. Türkiye also introduced a draft bill in May 2024 on the regulation, licensing and supervision of activities in digital assets.101,102,103 At the other end of the spectrum, North Macedonia banned activities in digital assets in 2016. And while Kazakhstan is a big miner of digital assets (around 13% of global Bitcoin), everyday trading, circulation or payments in these assets are mostly banned.
Great disparities in laws and regulations on digital assets exist across Middle East and African countries as well. In Egypt there is no specific law covering digital assets and the Central Bank of Egypt has issued various warnings against them with the latest published in March 2023.104 Other Islamic countries in North Africa such as Libya, Tunisia and Morocco have no regulation in place and the digital assets sector is very restricted.
A basic enabling framework remains an essential prerequisite for engaging users and businesses to increase digitalisation, the provision and take-up of blockchain-based solutions, and to build micro- and macro-economic resilience.
EBRD and Block can look to help address these issues through a series of potential next steps, set out in the next section.