The U.S. Treasury Department recently announced a strategy to promote financial inclusion among Americans, specifically excluding cryptocurrencies. The digital asset industry has long argued that cryptocurrencies can provide accessible and inclusive financial solutions, but the Treasury Department’s latest 35-page report only mentioned cryptocurrencies once, rather than as a tool for inclusion. Instead, it highlights the risks associated with cryptocurrencies, underscoring the department’s cautious stance on digital assets.
Limited mention of cryptocurrencies in Treasury strategy
The Biden administration’s approach to financial inclusion, led by the U.S. Treasury, is built around expanding access to affordable financial products and services. Treasury Secretary Janet Yellen emphasized this commitment, saying safe financial services play a critical role in empowering Americans’ financial security. However, the only mention of cryptocurrencies in the report came in the form of a warning, referencing previous research on ‘risks associated with digital assets’.
Vice President Kamala Harris has advocated for economic inclusion on the campaign trail, showing her position as more open to the potential role of cryptocurrencies in the economy. These nuances highlight divisions within the administration over digital assets, as her approach appears to contrast with the caution expressed by the Treasury Department.
Financial Inclusion and the Role of Cryptocurrency
Cryptocurrency proponents argue that digital assets have a low barrier to entry into finance. This is especially true for underprivileged groups who do not have access to traditional banking. For example, remittances and peer-to-peer transactions are often cited as real-world applications for cryptocurrencies that can benefit communities with limited banking options. Cryptocurrency sector advocates suggest that the decentralized nature of blockchain technology could reduce costs and make financial services more accessible on a global scale.
Despite these claims, organizations such as the Center for American Progress and the Brookings Institution are skeptical. They argue that the benefits of cryptocurrencies for financial inclusion have been overstated, and point to volatility and lack of regulatory oversight as concerns that could actually harm those the industry claims to support.
broader political environment
The administration’s stance on cryptocurrencies is taking shape in the broader context of the 2024 presidential election. Both Vice President Kamala Harris and her main rival, former President Donald Trump, have expressed their support for cryptocurrencies in various ways. Harris has mentioned the economic potential of cryptocurrencies, but her campaign has not fully explained how they would fit into her financial policies if elected. Trump, on the other hand, has publicly embraced digital assets during his time in office, a contrast to his administration’s handling of cryptocurrency regulation, including the SEC filing a lawsuit against major cryptocurrency project Ripple.
The Treasury’s focus on traditional financial systems rather than digital assets also appears to support a more cautious and gradual approach to inclusion. Although the strategy does not directly address digital currencies, its decision to only mention cryptocurrencies as a potential risk means regulatory caution is likely to continue in the near term.
Implications for the Cryptocurrency Sector
The Treasury’s cautious stance creates a challenging regulatory environment for cryptocurrency companies hoping to position themselves as solutions for financial inclusion. For example, companies like Ripple that offer blockchain-based payment services may face an uphill battle in convincing regulators of their utility for underbanked populations.
In fact, the broader cryptocurrency ecosystem may feel pressured by this strategy, signaling a preference for traditional financial infrastructure and regulators to address financial inclusion. With only a brief mention of the potential risks of cryptocurrencies, the Treasury’s report avoids arguing that digital assets can complement the traditional financial system by providing a decentralized and cost-effective alternative.
Outlook: Cryptocurrency and the Future of Inclusion
As the cryptocurrency sector continues to develop, the lack of approval from the Treasury Department may force digital asset advocates to work harder to get them recognized as a legitimate part of the financial system. The strategy report also leaves room for future administrations to maintain or reexamine the role of cryptocurrencies in financial inclusion.
Despite being missing from the U.S. Treasury’s inclusion plan, digital assets could find a foothold through other channels if enough institutional and political support coalesces around their potential. As the 2024 election progresses, the place of cryptocurrencies in the broader conversation about financial inclusion and regulatory policy is likely to become a key point of contention, potentially shaping the future of the cryptocurrency sector in the United States.
The US Treasury’s current strategy represents a conservative approach that favors tested financial mechanisms while distancing itself from the digital asset industry.
Featured Image: Deposit Photo @ EdZbarzhyvetsky
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