Stellar, PwC publishes ‘framework’ for judging emerging market blockchain projects

The Stellar Development Foundation, organizers of the Stellar Network, has released a financial inclusion framework for evaluating the effectiveness of emerging market blockchain projects. The framework was developed in collaboration with consultants PricewaterhouseCoopers International (PwC) and is detailed in a white paper published on 25 September.

Using this framework, the teams concluded that blockchain payments solutions could significantly increase access to financial products by lowering fees to 1% or less. In addition, blockchain products have helped increase the speed of payments and avoid inflation for users.

Some blockchain developers say their products could improve “financial inclusion.” In other words, they claim that their products can serve the unbanked in developing countries. Making this claim has been an effective way to get funding for some Web3 projects. For example, the United Nations International Children's Emergency Fund (UNICEF) has listed eight blockchain projects it has funded so far based on this idea.

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

To help facilitate this management, the two groups have proposed a framework for assessing the financial inclusion of a project. The framework consists of four dimensions: access, quality, trust and usability. Each of these parameters is further divided into sub-parameters. For example, “access” is divided into affordability, connectivity, and easy startup.

Each subscale specification includes a proposed method for measuring it. For example, Stellar and PwC list “# of CICO [cash in/cash out] Locations within a related population range to measure the “connectedness” parameter. This is intended to help projects measure their effectiveness scientifically rather than relying on guesswork.

The groups suggested a four-step evaluation process that projects should go through to address the issue of financial inclusion. The project should identify the solutions, the target population and the relevant authorities in the first phase. In Chapter 2, they should identify the barriers that prevent the target population from accessing financial services. At Level 3, commuters should use “level charts and guidelines” to determine the biggest roadblocks. And at the last stage, they should implement solutions that “prioritize key parameters” to use funds in the most effective way.

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

The second effective solution they found is savings. The group's stablecoin application in Argentina allows users to invest in an inflation-resistant digital asset that would otherwise see them lose their wealth.

Related: Argentina's presidential candidate wants CBDCs to ‘solve' hyperinflation

Constellation Network has been at the forefront of integrating payments into underserved financial markets. In December, he announced a program to help charities help Ukrainian refugees fleeing the war. On September 26, they announced a partnership with Moneygram to produce a non-cash crypto wallet that can be used in over 180 countries. However, some financial and monetary experts have criticized the use of cryptocurrency in emerging markets. For example, in A paper published by the Bank for International Settlements on August 22 argued that cryptocurrency has “raised financial risks” in emerging market economies.