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Report Summary: Debunking the narratives about cryptocurrency and financial inclusion by Tonantzin Carmona


Innovations in financial services may not necessarily translate into improved accessibility for underserved groups. Just as bank accounts are often subject to minimum balance requirements and high fees, and just as deceptively simple products like subprime and payday loans come with onerous repayment terms, cryptocurrencies create a number of risks not immediately – if ever – apparent to many users. Researcher Tonantzin Carmona looks at the realities of current decentralized finance offerings in this astute study and assesses whether they will live up to their promise of greater financial inclusion.


  • Proponents view cryptocurrencies as a way to serve the unbanked.
  • A disparity exists between what crypto purports to do and what it can do for the financially underserved.
  • Improving access to existing financial services may be more effective than crypto in increasing financial inclusion.


Proponents view cryptocurrencies as a way to serve the unbanked.

Banks are often absent in minority and low-income communities in the United States, and close to one-third of those without bank accounts lack the funds to maintain required minimum balances. Many use alternatives like prepaid debit cards, and some turn to high-cost, predatory products like payday and subprime loans.

“Many low-income Americans struggle with the cumbersome and outdated US payment system. Delays in financial transactions can pose significant obstacles for families and individuals who live paycheck to paycheck and need their checks to clear so they can pay for basic things like rent, food, bills and child care.”

Decentralized finance could make financial services available to those without access to banks. Advocates argue that cryptocurrencies can raise financial inclusion because of the platforms’ around-the-clock availability for payment transactions and for wealth building through investments in digital assets.

A disparity exists between what crypto purports to do and what it can do for the financially underserved.

Payments occur directly between users, peer-to-peer, on the blockchain. However, cryptocurrencies are volatile, and transactions can often be slow and expensive. Network fees and platform costs can be onerous, making crypto as costly as bank fees – if not more so. Most platforms require that the user have a bank account, negating the argument that crypto can serve the unbanked. Additionally, operational risks are inherent in cryptocurrency technology; the software is subject to bugs, and crypto wallets and exchanges have been compromised. A coterie of developers can hold an outsized amount of power, exercising a form of fiduciary authority that could alter code and affect a network’s stability.

“The recent collapse in cryptocurrency markets have only heightened the need to scrutinize crypto’s risks and drawbacks.”

Crypto’s volatility makes it better suited to speculation than wealth building. Backed solely by people’s belief in their viability, cryptocurrencies are subject to the whims of their holders, making them too risky for asset accumulation. Some 0.01% of bitcoin owners control more than one-quarter of the currency in circulation. As a remittance tool, crypto may improve on the high cost of existing money transfer services, but it is not a substitute for a less expensive and more efficient cash alternative.

Improving accessibility to existing financial services may be more effective than crypto.

Cryptocurrencies’ flaws could mean greater financial exclusion than inclusion. But policy makers can deploy several other more direct – and potentially higher impact – solutions to ensure that everyone can use financial services.

“Policy makers and regulators can protect retail investors and consumers while addressing financial inclusion in ways that do not require crypto.”

A national checking account service offered by the federal government through the central bank or the post office would do more to remedy the plight of the unbanked than crypto would. Regulators could require that all financial institutions make no-cost basic accounts available. And officials could institute policies that better address employment, housing, credit and lending discrimination.

About the Author

Tonantzin Carmona is a fellow at the Brookings Institution.

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