In 2014, Scott Onder, Co-Founder and Senior Managing Director of Mercy Corps Ventures, was trying to send money to Kenya to cover an intern's expenses. Her debit card wasn’t working, so instead, he sent her funds in bitcoin. For Scott, that successful transaction sparked a new world of possibilities with cryptocurrency early on. No longer was cryptocurrency simply an interesting theoretical concept – this pivotal moment revealed the potential for the then-obscure technology to build an entirely new ecosystem of solutions for unbanked populations.

As previously covered on the CoinFlip blog, cryptocurrency has a major role to play in responding to the growing global humanitarian need. Mercy Corps Ventures (MCV), the venture capital arm of the global humanitarian aid organization, Mercy Corps, is doing exactly that by advancing financial inclusion for unbanked people in emerging markets. As an early-stage investor, they provide support to startups in the form of equity investments and targeted strategic support, as well as running pilots that accelerate real world adoption of decentralized finance (DeFi) solutions. When MCV launched in 2015, there were very few customer-facing blockchain startups in emerging markets. Now, however, the blockchain-based financial inclusion landscape is populous and growing. We had the pleasure of sitting down with Scott (virtually) to learn more about how MCV is leading as a first mover working at the intersection of international development, impact investment, and digital finance.

Here’s what we learned.

Four practical insights from emerging cryptocurrency markets over the past few years

Stay laser focused on customer needs. MCV’s target group – the 1.7 billion unbanked people across the world – is a multidimensional market with hundreds if not thousands of different customer types. There is no one-size-fits-all solution. The startups MCV partners with are embedding user experience into the design of their work in order to increase uptake of their crypto-based products. Some customer types MCV has worked with include young gig economy workers, rural smallholder farmers, and microbusiness owners.

Financial literacy and education for cryptocurrency users is crucial. Cryptocurrency is being designed and innovated upon as we speak. It is essential that users are aware of the risks associated with the technology alongside the opportunities. This is a lesson from not only emerging markets, but all users of any education level, in any country, across all demographics. Companies working toward financial inclusion must raise awareness and educate users on financial services and cryptocurrency to ensure responsible participation.

Stablecoins offer a lower risk profile for people in emerging markets. Stablecoins, as their name indicates, are a type of cryptocurrency with a steady value backed by a reserve asset like the U.S. dollar. For people living in countries with high inflation, this is particularly transformative because it provides the benefits of digital currency without price volatility. We already know that more than half of physical $100 bills are circulated outside of the US, in large part because the dollar is a stable, safe asset. For people living in countries with high inflation like Zimbabwe or Venezuela, stablecoins actually lower risk by enabling users to save in a more stable digital currency.

Advancing financial inclusion means actively advocating for equal access to cryptocurrency products for everyone. For example, MCV has been vocal about how overly restrictive identity requirements, commonly referred to as “Know Your Customer” requirements, can gatekeep financial participation and these requirements tend to vary by country. Global policies that apply strict requirements on cryptocurrency payments will create a massive barrier to financial inclusion. MCV has publicly advocated for lowering barriers to inclusion by using tools like unhosted wallets. (Note: CoinFlip also shared public comments responding to the same proposed rulemaking last year.)

Trends in the crypto space that Mercy Corps Ventures is watching

To date, cryptocurrency has primarily been used in emerging markets as a peer-to-peer payment tool. However, innovations around decentralized finance (DeFi) are becoming increasingly relevant. MCV has been actively participating in DeFi governance networks and anticipates an increasing number of low-cost, accessible DeFi products that will be relevant for the unbanked. Within the DeFi world, they are keeping their eyes on two trends in particular.

Climate & crypto. As a venture fund working at the nexus of climate and cryptocurrency, MCV is closely watching how entrepreneurs are connecting carbon markets to blockchain, and how their investments can support incentivizing smallholder farmers to apply regenerative and climate-smart agricultural approaches. This trend is part of a growing movement championing regenerative finance.

Web 3.0. The democratic ownership model proposed by Web 3.0 introduces attractive opportunities for everyone. For the unbanked, MCV is particularly drawn to the potential for individuals to control their own data and manage self-sovereign identity systems. One practical use case is for gig economy workers. Through Web 3.0, digital microworkers, drivers on ride-sharing platforms, and delivery service providers can gain ownership of the value they are creating beyond simply gaining a paycheck for services provided. Doing so allows digital workers to gain net worth, accumulate savings, and become more financially resilient.

Final Thoughts

As an investor in both frontier markets and frontier technologies, MCV is intentional about “breaking down the binary between investor and entrepreneur.” Everyone has a role to play in building the future decentralized financial ecosystem, and the power dynamics characteristic of traditional venture capital no longer apply.

We ended our conversation with the question, “Who else should we be watching in this space?” True to his ethos as a hands-on investor, Scott named close collaborators like Celo and IDEO CoLab, as well as portfolio companies including Topl, Goldfinch, and Emerging Impact, all of whom are contributing to the digital financial ecosystem in different, powerful ways. Stay up to date on Mercy Corps Ventures here, and follow Scott on Twitter here.