Stellar and PwC Introduce Framework to Assess Blockchain Projects in Emerging Markets

The Stellar Development Foundation, the team behind the Stellar network, has unveiled a financial inclusion framework aimed at evaluating the effectiveness of blockchain projects in emerging markets. This framework, named Project Atlas, has been co-developed in partnership with consultants from PricewaterhouseCoopers International (PwC) and was detailed in a white paper released on September 25th.

Project Atlas seeks to bridge existing data gaps by crafting a specialized data platform that integrates various data sources to highlight the macroeconomic significance of crypto and DeFi. This framework combines off-chain data with on-chain data to produce new statistics and validate existing ones.

Some blockchain developers claim their products can enhance “financial inclusion”, suggesting their offerings can cater to the unbanked populations in developing regions. This claim has become a popular pitch for Web3 projects seeking funding. For instance, the UNICEF Innovation Fund has listed eight blockchain projects it has financially supported based on this premise.

However, Stellar and PwC argue that without a proper framework to assess what’s needed for success, projects might not truly enhance financial inclusion. They emphasize the importance of robust governance and responsible design principles for successful implementation.

To promote such governance, the teams have proposed a framework to determine if a project is likely to foster financial inclusion. This framework is based on four parameters: access, quality, trust, and usage. Each parameter is further broken down into sub-parameters. For instance, “access” is further divided into affordability, connectivity, and ease of initiation.

Each sub-parameter comes with a proposed measurement method. For example, to measure the “connectivity” metric, Stellar and PwC suggest looking at the “# of CICO [cash in/cash out] locations within the relevant target population region”. This ensures projects can scientifically measure their effectiveness rather than relying on guesswork.

The teams have also outlined a four-phase evaluation process for projects aiming to address a financial inclusion issue. This process involves identifying a solution, target population, and relevant jurisdiction in the first phase. In the subsequent phases, projects should identify barriers, use “level and orientation charts” to pinpoint the biggest challenges, and finally, implement solutions that prioritize key parameters for efficient fund utilization.

Using this framework, the teams identified at least two blockchain-based solutions that have proven effective in enhancing financial inclusion. The first is payments. They found that traditional financial apps charge an average of 2.7-3.5% for sending money between the US and the studied market, while blockchain-based solutions charged 1% or less. The second effective solution was savings, with a stablecoin app in Argentina allowing users to invest in an inflation-resistant digital asset.

Stellar’s network has been at the forefront of payment inclusion in underserved financial markets. In December, they announced a program to assist charities in distributing funds to aid Ukrainian refugees fleeing war. On September 26th, they revealed a partnership with Moneygram to produce a non-custodial cryptocurrency wallet usable in over 180 countries. However, some financial experts have criticized the use of cryptocurrencies in emerging markets, arguing they have “amplified financial risks.

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