US Senator: Crypto Assets Aren’t a Magic Bullet for Creating Financial Inclusion to Low Income Communities


Blockchains might be a very interesting technology, but they are not enough in order to create financial inclusion for the people who need the most: the underbanked and unbanked. At least that is what Senator Brian Schatz, a Democrat from Hawaii, has recently affirmed during the latest U. S. Senate hearing about cryptos.

During this week, another U. S. Senate hearing about the blockchain technology is happening. This time, however, the main subject is not Facebook’s Libra stablecoin but cryptocurrencies as a whole. The Senate welcomes Jeremy Allaire (the CEO of Circle) and the University of California law professor Mehrsa Baradan to talk about cryptos.

According to Schatz, which was arguing with Allaire during some point of the hearing, the claim that the blockchain technology will solve financial inclusion is pretty common but it is far from being the truth.

He affirmed that “tech people” want to “wave a wand” a avoid the tough reality of politics by offering a technology that allegedly solves all problems, which is not the truth. He then asked Allaire if he thought that a society in which only four out of five people had smartphones could really see the democratization of banking.

Schatz’s point was that the blockchain is, indeed, very interesting, but far from a panacea, especially because the underbanked or unbanked people will be exactly the same people who lack access to the technology that could help them in the first place. He affirmed that Allaire had failed to persuade anyone to believe that the blockchain could bank low-income families.

Allaire answered that this was, indeed, a very complex problem. According to him, the technology may provide an avenue to try to solve the issue, but the problems are social and not only technological, so the blockchain really will not be able to solve it all as some people would like.

The Problem Is Not The Technology

Baradaran also talked about the blockchain technology and its relation with inclusion during the hearing. She affirmed that around a quarter of the country’s population has no access to banking services. This, she believes, was not due to the lack of technology but of public policies instead.

According to her, these people spend a lot of money trying to access alternative methods in order to get cash without the banks, so this is a huge issue. However, she affirmed that the blockchain can work well as a point of access to people because it could be used to provide a way to easily access banks.

However, the fact that the blockchain may help should not be confused with the fact that the main issue is very different, in her opinion. She affirmed that low-income people live in a “banking desert” because the banks are simply not slightly interested in these people.

Schatz agreed that the blockchain was far from a useless technology, but he agreed with Baradaran. So, in order to fix this, technology alone won’t cut it. The only way to get a really good result is by fixing the issues with the intermediary steps. While the blockchain is very useful, it is just a tool, not the solution itself. Someone needs to want to use the tool for it to work as intended.

He concluded by affirming that it is not very productive to keep alleging that the technology, which he admitted to being groundbreaking, would cure societal ills. Because of this, knowing the boundaries of the blockchain is the first step to create a comprehensive framework to regulate it well.

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