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Debunking the narratives about cryptocurrency and financial inclusion
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Debunking the narratives about cryptocurrency and financial inclusion

Tonantzin Carmona
Brookings Institution, 2022
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8

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  • Analytical
  • Overview
  • Background

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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.

Summary

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. 

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...

About the Author

Tonantzin Carmona is a fellow at the Brookings Institution.

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