One of the key myths concerning cryptocurrency is the claim that these new forms of money will increase financial inclusion by making financial services more broadly available to poor and low-income consumers. This is an unproven assertion at best, an allegation of dubious veracity, made in all likelihood to obtain regulatory support for cryptocurrencies.
No independent, objective data exists to support the inclusion claim with respect to Black people and communities of color. This is the same tactic used to generate regulatory support for subprime lending, and, as with that disaster, it is a myth. While my support for cryptocurrency rests on it’s potential to increase financial inclusion, the fact is that this potential is unproven. Hyperbolic and false statements about financial inclusion make it less likely that this potential will ever be realized.
In a statement for the record to the House Financial Services Committee following their December 8th hearing on digital currencies, I asserted that:
"It is critical to understand that bitcoin was created in direct response to the failure of global regulators to protect the public in the years leading up to the financial crisis of 2007/2008. Thus, the social and monetary functionality of cryptocurrency is superior to that of paper money. Eventually, cryptocurrency is going to dominate."
I continue to believe that. But I also believe the realities of systemic racism and exclusion in the US economy make it impossible to have faith in any assertion that cryptocurrency will, via the private sector alone, increase financial inclusion.
In fact, I cautioned the Committee not to believe, at face value, the hopeful claims made by participants in this new field. The ability of digital currency technologies to increase financial inclusion will not be independent of an impetus to do so from government. Indeed, the absence of a nexus between emerging cryptocurrencies and financial inclusion was illustrated by the lack of African Americans participation on the December 8th hearing witness panel.
To protect the public, I suggest legislation mandating that these “financial inclusion” claims be given real weight, with penalties for not meeting clearly specified financial inclusion goals. This would be a crypto equivalent to the Community Reinvestment Act, a Crypto CRA. The development of a methodology for measuring “crypto financial inclusion” might be the first benefit from this approach.
These suggestions point to the fact that cryptocurrency and blockchain highlight the hidden, fourth function of money. The three widely recognized main functions of money are as: a medium of exchange, a unit of account, a store of value.
There is a fourth function of money that is hidden and rarely discussed: as a means of social control. Crypto currency forces this function into the open.
Loss of social control is the key issue and the main reason regulators around the world fear this new technology. One solution starts with the reestablishment of financial institution regulatory policies that promote the public interest, and not the interests of large financial institutions.