Seven months ago, the Bitcoin Foundation formed the Committee for Financial Inclusion. Andreas Antonopoulos was to head it, and things looked promising for a while.
Since then, however, Antonopoulos has stepped down, following concerns about the foundation’s management. “No one stepped up as a replacement,” said one senior executive at the foundation. Another confirmed that the Committee for Financial Inclusion was on hold for now.
In the meantime, most of the industry development around bitcoin – this levelling force that has so much potential for the unbanked – still seems to be run by a collection of people who are decidedly banked.
This begs the question: what part do the unbanked play in bitcoin, its use and evolution?
We can look at two bodies of evidence to find out who runs the industry atop this decentralized network: who’s talking about bitcoin, and who owns it.
Sampling a few events from CoinDesk’s list of upcoming cryptocurrency conferences reveals an unsettling but also unsurprising truth: most of the people on the speaker lists are from relatively privileged backgrounds.
You’ll find a sprinkling of academics here, and a smattering of venture capitalists there. You’ll spot the watchers: analysts, and western journalists, like me. There’s a gaggle of lawyers, and, of course, a gang of entrepreneurs, most of whom were from a particular demographic: young, white, and male, and often with a technology background.
You will find the occasional outlier. One past speaker is the CEO of a company created specifically to serve the unbanked. But these are anomalies. Even those events held in countries where a sizeable proportion of the population is unbanked feature speakers from the top end of the financial pyramid.
Where are the representatives from the other 2.5 billion who do not have access to financial institutions? The local grassroots financial activists? People from communities in poor, or undeveloped economies, using bitcoin to help better their environments?
Those unbanked communities aren’t just in developing countries, by the way.
In the US, one in 12 households are unbanked – a number which is holding steady, if not slightly increasing.
Furthermore, another one in five are ‘underbanked’ (meaning that they have chequing accounts, but have used alternative financial services such as non-bank check cashing services or pawn shops). These households are just as in need of cheap financial services as those in other parts of the world.
The other indicator is ownership. Analyses such as this one suggest that a relatively small number of players own a large percentage of the bitcoins. Some of those are owned by exchanges. Others are Satoshi’s, say experts – and good for him – but there are more, owned by a small number of players.
Numbers from different analyses will vary, but it’s pretty clear that there is a heavy concentration of ownership. Some are owned by financial players including the Winklevoss twins, who 18 months ago claimed to own 1% of all bitcoins mined.
And then there are the early adopters who made it big with bitcoin, who have become celebrities in their own right.
This is natural, I suppose. Bitcoin’s short-term destiny was always as a speculative instrument, which lends itself to hoarding as speculators anticipate an increase in value. It’s damaging for both liquidity and equality alike, however.
Incidentally, a lack of liquidity and a disproportionate concentration of ownership among a small number of influencers also makes bitcoin a dangerous short- to mid-term investment vehicle, because those players can manipulate the value as they see fit. That makes the market less rational and efficient.
Tracking investments in cryptocurrency-based companies shows a potential trend towards more equality, but it’s short lived.
CoinDesk’s Q3 State of Bitcoin report shows a 35% increase in Latin American bitcoin investments, but that region’s funding is still miniscule as a proportion of overall bitcoin investments. In the meantime, European bitcoin firms saw a massive 60% jump during the quarter.
If we want to make bitcoin truly inclusive – to fuel microfinance projects, say, or to help provide financial services to the unbanked at home and away – then this concentration of power has to change.
Speech is power, and we need to hear voices from other communities. Property is power, and the concentrated ownership of bitcoin must be diluted.
This dilution is likely to happen not from the top down, but from the bottom up. The important gap here consists of local community leaders in areas where traditional financial services aren’t working.
These communities must be empowered to work with bitcoin, to help grease the financial wheels and get funds flowing. Ideally, they should have some voices in its direction too.
The success of such empowering projects depends in part on positive regulation. It also depends on liquidity, which will develop as people begin treating bitcoin as a means of exchange, rather than as a speculative instrument.
We still have a way to go here, though. People continue to focus more on the price of their investments than they do on how bitcoin can be used as a means of exchange. More than half of the top 10 stories on CoinDesk in Q3 were about bitcoin’s price.
It isn’t all doom and gloom. There are some promising signs of activity in traditionally excluded communities.
The Women’s Annex Foundation has pledged to use bitcoin as a way to reward Afghan girls for social media engagement and video production. Those girls may otherwise have their money confiscated by their families to discourage independence.
We have seen bitcoin vouchers launched to help the unbanked in London and Africa, who can now buy bitcoin over the counter, without access to the Internet, or a phone even. In Indonesia, where 80% of people are unbanked, Indomaret is providing over-the-counter bitcoin sales.
In the US, Expresscoin hopes to cater for those one-in-12 unbanked users with its bitcoin sales service. Even Coinbase, which Expresscoin sees as a competitor, has said that it’s interested in this market.
Others are targeting empowerment through exchanges. BlinkTrade is enabling bitcoin brokers from Africa to Venezuela the chance to run their own online bitcoin exchanges on its platform.
And then, there are remittances. This is the market that bitcoin was made to serve. Getting money home is a big problem for low-income migrant workers. Coins.ph and others are tackling that problem for Filipino workers. Beam is doing the same for Ghana and Nigeria.
But the remittances market too, is fraught with challenges, including the need for computing infrastructure at the receiving end, along with regulatory burdens.
Let’s not repeat history
It’s encouraging to see bitcoin usage trickling into non-privileged communities, even as ownership and control still appear to be concentrated among particular demographics.
We are, after all, at an early stage in the life of this cryptocurrency, where a financial ecosystem and a layer of business services are still being built.
As the Bitcoin Foundation’s Micky Malka has said, “You cannot expect bitcoin at five years old to take all that responsibility and act like a grown-up. It is still a toddler.”
But a young initiative has multiple possible futures. Earlier this year, Oxfam found that around 1% of the world’s population owns half of its wealth. Our opportunity is to avoid history repeating itself, by taking action early, so that we don’t end up repeating the same centralisation of power.
Antonopoulos is hoping to start work again on financial inclusion sometime in the next month. Let’s hope that, as the thriving cryptocurrency industry develops, banking the unbanked takes a stronger shape as a concerted effort, with solid backing.
Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.
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