Many people believe that crypto will increase access to financial services for underbanked communities.
These crypto proponents say that the abundance of mobile devices will allow people to skip banks altogether and to use crypto instead. More than five billion people in the world – nearly 70% – currently own a cell phone, according to the international mobile technology trade organization GSMA, and a large portion come from underserved areas with little if any access to banking services.
The crypto believers say that crypto, particularly some of the latest Web 3 innovations, offers hope for the underbanked, and that serving the underbanked is where crypto can be most useful. They add that traditional financial institutions’ slothlike service can’t compete with cryptocurrency technology.
But new crypto technologies are far from helping underserved communities escape their financial isolation. The companies behind crypto, including but not limited to decentralized finance (DeFi), have failed to provide user friendly apps, educational resources and other tools.
The tools themselves are often hard to use. As a result, bitcoin (BTC) and other cryptos have yet to make substantial inroads as usable currencies. Bitcoin’s volatility is also discouraging. How can people put faith in an asset whose price seems to rise and fall with the winds?
Indeed, even as public awareness about crypto mushrooms, and some of the world’s largest institutional investors launch their first projects to address demand for the asset, crypto has yet to approach parity with traditional currencies. Even in the United States, with its massive wealth and hubs of innovation, people rarely use crypto to pay rent, taxes or other common expenses. Relatively few retailers accept it.
What can crypto provide if the controls are hard to use and those who might use it don’t have enough willing partners to make the system work? They might as well be given fighter jets to fly.
To be sure, I remain a believer in crypto’s potential. I see bitcoin, and perhaps several altcoins one day becoming common forms of exchange. I view blockchain technology as a way to improve entrenched, centralized systems in financial services and perhaps every other industry. I believe that crypto can change lives because it serves the individual consumer’s needs.