On September 16, the U.S. Department of the Treasury issued two reports in response to President Joe Biden’s Executive Order (EO) on Ensuring Responsible Development of Digital Assets, which requires government agencies to develop frameworks and policy recommendations that advance six priorities, one of which being financial inclusion. Among the Treasury reports was Crypto-Assets: Implications for Consumers, Investors, and Businesses, which highlighted a number of risks associated with cryptocurrencies.1 Two important points were raised: First, that “the potential financial inclusion benefits of crypto-assets largely have yet to materialize.” And second, “while the data for populations vulnerable to disparate impacts remains limited, available evidence suggests that crypto-asset products may present heightened risks to these groups.”2
With these two points in mind, it is crucial to emphasize that crypto’s current state and its potential are very different, including when it comes to financial inclusion claims. Moreover, exploring a technology’s potential should go beyond its upsides, since there are both existing risks and drawbacks as well as future ones if the sector continues to grow. Until more evidence is available regarding the technology’s progress or adequate consumer protections, policymakers should be wary of claims that crypto will bolster financial inclusion.
Numerous narratives exist regarding crypto and financial inclusion, each addressing a different set of needs or group of individuals. But a closer examination of these narratives reveals a mismatch between what crypto can actually provide and the needs of the groups it purports to serve. This piece will explore crypto’s potential to exacerbate unequal financial services to historically excluded groups, and how policymakers and regulators can protect retail investors and consumers while addressing financial inclusion in ways that do not require crypto.
Analyzing…
