Crypto’s False Promises, and What True Financial Inclusion Looks Like

In early November, the major cryptocurrency exchange platform FTX imploded, instantly evaporating billions of dollars in customers’ money. Though the various causes and consequences of FTX’s collapse are still being investigated, its eventual crash always seemed inevitable. Entirely digital products with values derived only through other peoples’ interest in them, cryptos are innately volatile and exist in an industry rife with fraud. FTX’s downfall underscores the disconnect between that reality and the crypto industry’s purported vision of a more stable and inclusive financial system. And it’s a reminder that crypto’s unfulfilled promises have pulled our collective energy away from proven, public solutions to the very problems it claims to solve.

While undeniably a flawed product, crypto took off in part because it accurately put its finger on real economic problems. Decades of wage stagnation and cuts to public-interest programs and services—like housing and education—have increased families’ costs while robbing them of their ability to build wealth for the future. Today, the top 10 percent of US households own over two-thirds of all wealth, while the bottom half collectively own only 3 percent. On average, a white American holds more than six times the wealth of a Black American. Even when families are able to accumulate savings, expensive and exclusive banking practices—from punitive overdraft fees to discriminatory language barriers—make it difficult to store their money safely in our traditional banking system.

The crypto industry has profited from these economic dysfunctions by intentionally marketing itself as a secure, easy-access, and equal-opportunity path to individual wealth-building. For example, crypto companies have touted language and narratives that their products “democratize” our financial system or “enable financial inclusion.” Many firms have leaned into the history of racialized wealth and income disparities, marketing their products specifically to historically marginalized groups and branding their products as “a new opportunity for minority groups to generate true, generational wealth.” Other companies have proclaimed their products the “vaccine” in the fight against corruption in the financial system.

But neither the private crypto firms nor the industry writ large delivered on these promises. In fact, in a September 2022 report, the US Treasury Department found that none of crypto’s purported benefits to financial inclusion aims have materialized. Attempts to use crypto as a catalyst for social change—such as those in El Salvador, where crypto has been proffered as a route to the country’s financial independence—have resulted in repression and economic turmoil. And, as the ongoing FTX debacle demonstrates, the corruption and self-dealing of traditional finance are just as prevalent (or worse) in the crypto world.

While the emptiness of the industry’s public-interest language and arguments about financial inclusion become clearer with each crash and failure to deliver, those false promises also distract from legitimate policy solutions. For instance, just this year, crypto industry lobbyists successfully moved multiple pieces of industry-friendly regulatory legislation. The political viability of these bills is uncertain as the FTX collapse has both highlighted the need for comprehensive regulatory legislation and exposed the sympathetic treatment of crypto firms in the current drafts.

But no matter how successful industry insiders are in reviving crypto’s reputation and political influence in the months and years ahead, it will always remain a private endeavor whose central interests are misaligned with the goals of an accessible and equitable economy.

Crypto—or any private, profit-driven enterprise—is never going to solve the entrenched problems of income or wealth inequality or the financial system’s inaccessibility. In fact, it exacerbates these problems. Rather than allow crypto to co-opt the language and rationale of financial inclusion and economic fairness, we need—and deserve—truly public-interest solutions to achieve these aims, including:

• Individual income tax reforms such as a wealth tax that would, in making the uber-wealthy pay their fair share, inject fundamental fairness into our lopsided tax code while raising revenues to pay for critical public-interest programs and services that bring costs down for American families and communities.
• Corporate income tax reforms, especially those to help eliminate existing incentives for rampant corporate consolidation that is partly responsible for higher prices for consumers, lower wages and fewer jobs for workers, and reduced investments and worse well-being for communities.
• Public banking options, like a system of FedAccounts with in-person retail services offered through the US Postal Service (USPS), that would help integrate the consideration of money as a public good into our financial system and ensure free and fair access to our banking system. This is a crucial prerequisite for individuals and families to safely and freely store, save, and access their money.
• Public asset managers to provide a public-interest alternative to mega financial institutions and to leverage the power of the federal government as a market participant in order to help direct household savings and wealth toward sustainable investments in the public interest—including those that support a healthy planet and equitable economy.
• Baby bonds, or “Baby Trusts,” that would hold seed capital (the amount determined by the economic position of that child’s family) in public trust for every child born in the US, thereby creating an automatic and immediate opportunity for individuals and families to build wealth for their futures.

Crypto’s ardent advocates got one thing right: Our economy is broken. But the crypto industry isn’t trying to fix it.

We’ve previously written about crypto’s numerous red flags—including that it poses a disproportionate threat to the economic stability of Black and brown families, represents a systemic risk to the larger US macroeconomy, inflames climate change, and serves as a refuge for bad actors and fraudsters. While these problems are inherent in the design and dissemination of crypto, they’re made worse by the absence of meaningful or comprehensive crypto regulations. That combination leaves all of crypto’s investors—especially the Black and brown investors who disproportionately hold crypto—in the lurch.

Instead of banking on crypto to solve the very economic problems that it’s exacerbating, we need comprehensive policy solutions that both correct the existing dysfunctions in our economy—which privilege the white, wealthy, and well-connected—and create clearer and stronger pathways for all US households to build wealth and achieve economic security.