How to achieve crypto-inclusion

  • 21 January 2022
  • Blog | Fintech and Innovation in Banking | Blog

Over the past decade, digital currencies have become one of the most intriguing features of the global financial sector. With opinions varying wildly on their potential usage, how do we go about achieving crypto-inclusion? 

Seen in equal measure as either an innovative investments vehicle that operates for the people, free from the shackles of traditional banking; or a high-risk gamble that offers only volatility with none of the usual regulatory protection, digital currencies have undoubtedly been a challenging concept for the industry to come to terms with. 

Digital currencies in themselves have many attributes that are worth closer examination – not least as a rapid, cheaper, and internationally compatible payment method that could be made available to all at both wholesale and retail levels. Central banks across a large number of jurisdictions have been examining the steps needed to formalise the infrastructural and security benefits that come with digital currencies. The Bank of England and the ECB have themselves indicated a willingness to proceed when the time is right. 

At the same time, however, technological advances and the parallel downgrading of cash have caused further pressure to be placed on governments and the banking community to ensure that genuine efforts are being maintained to widen global financial inclusion. In response to findings in 2014 that showed an estimated two billion people to be lacking a transaction account, the Word Bank responded by launching its Universal Financial Access 2020 initiative to redress the balance. 

To date, however, only modest progress has been made, thanks to the combination of an economically paralysing pandemic, plus the sheer burden of trying to collaborate within the current global financial system. 

The conditions may never be right for Edward Deleon, CEO of US-based decentralised technology company, Anatha. His bold stance is that the global economic system is not so much in need of repair as in need of a complete reset. This in turn has far-reaching implications for the way in which the global ranks of the financially excluded can be brought into the fold in a much fairer manner. 

Starting with the premise of adopting a universal basic income (UBI) – an increasingly attractive redistributive policy tool for developed and developing-market governments alike - Deleon explains that it should be implemented “with a new set of strategies, enabled by new technologies like crypto and artificial intelligence (AI), to go beyond fiat currencies and taxation while empowering governments and the people they serve simultaneously”. 

The trouble with the orthodox model of UBI, he says, is that it simply becomes another stream for taxation, which in his view is as unfair as it is inefficient. “In new economies [however], you can simply use inflation models for new digital currencies to fund the government directly from the money supply and eliminate taxation altogether.” 

As radical as this proposal is, it defines at least one way in which crypto technology might harmonise with the needs of the poorer and financially excluded in society. It remains to be seen, however, whether the global push to ‘build back better’ will yet include a currency system that fully embraces distributed technology and removes the need for taxes.