Can Cryptocurrency Still Deliver on Financial Inclusion?

Cryptocurrency’s emergence was once hailed as a means to create a more equitable financial landscape, offering hope to marginalised communities and those underserved by traditional financial systems. However, the descent of cryptocurrency markets, along with the recent setbacks faced by crypto-friendly banks, has cast doubts on this narrative.

Financial Inclusion Before Cryptocurrencies

Prior to the emergence of cryptocurrencies, the landscape of financial inclusion was marked by pronounced inequalities and formidable obstacles. Conventional financial structures exhibited profound centralisation, rendering them frequently out of reach for substantial portions of the populace, especially within the realms of developing nations. Marginalised communities, individuals without conventional income sources, and those living in remote areas found it exceedingly difficult to access basic financial services.

Banking services, such as savings accounts and loans, were often out of reach due to stringent requirements, high fees, and the need for physical infrastructure. This exclusion perpetuated a cycle of poverty and limited opportunities for many. Moreover, traditional financial systems were marred by discrimination, further exacerbating the financial divide. Access to credit and other financial tools was disproportionately limited for certain communities.

The Unintended Course of Cryptocurrencies

The initial mission of cryptocurrencies was to construct a financial ecosystem free from the inequalities plaguing traditional finance. To achieve this, it is crucial to involve individuals from diverse backgrounds, particularly women and people of colour, who possess unique qualities, in the shortcomings of the existing system.

The COVID-19 pandemic led to a surge in cryptocurrency adoption, driven by historically low interest rates that encouraged borrowing and speculative investments in high-risk assets. However, this euphoria was short-lived, as a dramatic crash in 2022 resulted in substantial losses and insolvencies. Cryptocurrencies, as largely unregulated assets, are inherently volatile and lack protective mechanisms, making them susceptible to fraud and hacking.

Notwithstanding these hurdles, findings from surveys conducted by the Pew Research Centre in 2021 and 2022 reveal that around 20% of Black, Hispanic, and Asian American adults residing in the United States have embraced cryptocurrency. Cryptocurrencies continue to beckon with the alluring promise of direct peer-to-peer exchanges devoid of intermediaries, potentially opening doors to wealth accumulation.

Also Read: How PayPal’s PYUSD Could Change the Crypto Landscape

OnlyFans: A Unique Intersection

OnlyFans, a platform dedicated to content creators, plays a unique role in the crypto debate. Its mission to help creators monetise their work is especially crucial for adult content creators, who often face financial exclusion. Nearly two-thirds of individuals in the adult industry have experienced the loss of a bank account or other financial tools, emphasising the need for alternative financial services.

👀 Onlyfans parent company Fenix International has disclosed an investment in #Ethereum.

The company acquired an unnamed amount of $ETH worth $19.88 million.

As of the end of November 2022, the loss amounted to $8.45 million. pic.twitter.com/tzb6ilifAk

— Sjuul | AltCryptoGems (@AltCryptoGems) August 28, 2023

Reports that Only Fans parent company, Fenix International, invested $20 million in Ethereum between 2021 and 2022 raised questions about the platform’s potential use of cryptocurrency as a payment option. However, OnlyFans clarified that its Ethereum holdings were unrelated to creator operations, and it had no immediate plans to implement crypto as a payment method due to the currency’s volatility.

Cryptocurrency’s Potential for Financial Inclusion

Despite the caution exhibited by companies such as OnlyFans, cryptocurrency advocates highlight its advantages in terms of financial inclusion. While crypto does not provide total anonymity, it offers privacy and security in transactions. The public ledger allows for traceability, while the private key ensures transaction authorisation, adding a layer of protection and confidentiality.

Additionally, the relevance of digital assets is growing, as evidenced by PayPal’s introduction of a dollar-denominated stablecoin on Venmo. However, unlocking cryptocurrency’s potential for financial inclusion requires collaboration between governments and financial institutions to establish a regulatory framework that ensures consumer protection, prevents money laundering, and promotes innovation within the crypto space.

The Role of Crypto Regulators

Regulators and companies like OnlyFans have valid concerns. Figures like Maxine Waters are closely monitoring the cryptocurrency landscape due to the lack of a strong federal framework for governing digital assets, particularly stablecoins. With PayPal’s stablecoin reaching over 435 million users globally, there’s a substantial potential impact on consumers. The absence of oversight in the digital currency domain exposes consumers to potential risks from unscrupulous actors. Waters passionately advocates for the urgent implementation of federal-level consumer protections.

Amid this complexity, a call for bipartisan unity arises. As the crypto and fintech industries advance, regulators and policymakers face the challenging task of balancing innovation with safeguarding interests. Achieving this balance is an ongoing process requiring collaboration, adaptability, and an unwavering commitment to consumer protection and technological progress. It holds immense significance as digital assets reshape the financial landscape.

Conclusion 

Cryptocurrency’s promise of financial inclusion, freedom, and empowerment aligns with its original intent as envisioned by Satoshi Nakamoto. In order to fully realise this potential, it is imperative to engage a variety of perspectives and establish a regulatory framework that not only safeguards consumers but also nurtures innovation. As digital assets continue to reshape the financial terrain, the upcoming generation of leaders and trailblazers will be pivotal in propelling the mission of enhancing financial inclusion.

 Also Read: U.S. Department of Justice Bolsters Crypto Enforcement to Fight Crime

Frequently Asked Questions

What Caused the Dramatic Crypto Market Crash in 2022?

There are several reasons that can be attributed as leading causes of the crypto market crash of 2022. Among these factors are the worldwide surge in inflation and escalating interest rates, factors that have diminished the attractiveness of cryptocurrencies as a safeguard against the depreciation of traditional fiat currencies. Additionally, we’ve witnessed stringent regulatory measures and prohibitions on cryptocurrency trading and mining in nations such as China, India, and Turkey, exerting a constraining effect on both the supply and demand for cryptocurrencies.

Why Did OnlyFans Invest in Ethereum in 2022?

There are several reasons why OnlyFans invested in Ethereum in 2022. For instance, the company wanted to diversify its operational capital and hedge against fiat currency devaluation, especially in the wake of global inflation and rising interest rates. There are also reports that OnlyFans wanted to leverage Ethereum technology to create new features and services for its users and creators, such as DAOs, DeFi, and NFTs.

What Hurdles Exist That Do Not Allow Financial Inclusion in Cryptocurrencies?

Cryptocurrency encounters obstacles like regulatory ambiguity, price instability, and limited mainstream acceptance. Regulatory issues can restrict accessibility, while price fluctuations discourage prospective users. Moreover, the intricate nature of cryptocurrency technology and a general lack of comprehension can impede financial inclusion.