This article has been written by Dilpreet Kaur pursuing a Remote freelancing and profile building program from Skill Arbitrage.

This article has been edited and published by Shashwat Kaushik.


In simple terms, financial inclusion means having access to and use of financial goods and services. Financial inclusion is indispensable for sustainable development and for creating an egalitarian, democratic society. Governments throughout the world have realised the significance of the term and have been taking steps to gravitate slowly towards achieving it. Unfortunately, despite mammoth efforts taken, a significant proportion of the world population still does not enjoy free access to and use of financial goods and services, which, in turn, hampers their socioeconomic growth. The majority of these people are located in developing countries. There are myriad social, economic, cultural, and perhaps political reasons that have contributed to the financial exclusion of these people. One of the recent solutions to financial exclusion that has been adduced by many is cryptocurrencies. The supporters of cryptocurrencies believe that functional features that are inherent in cryptocurrencies will put an end to financial exclusion. There are others who are not fully convinced and are incredulous about the worth of cryptocurrencies in achieving financial inclusion. Therefore, the article will present a critical assessment of the role of cryptocurrencies in achieving financial inclusion, along with relevant suggestions to make the digital currency more transparent, effective, and trustworthy.

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Meaning of financial inclusion and its significance

Financial inclusion refers to providing universal access to useful financial services and products like credit, savings, payments, etc. to “individuals and organisations” at a reasonable cost, in a responsible and sustainable way, and without any discrimination. The focus of financial inclusion lies with underprivileged sections of society.

Financial inclusion is essential to achieving inclusive growth and economic development. People who do not have access to banks are called “unbanked,” and those who have access to banks yet use alternative financial services are called “underbanked.”. The immediate goal of financial inclusion is to reduce the number of unbanked and underbanked people. However, the long-term goal of the concept goes way beyond banks. It seeks to expand the horizons of financial goods and services to improve people’s socio-economic well-being. 

Therefore, financial inclusion plays a significant role in poverty alleviation, ensuring food security, health, literacy, gender parity, financial independence for the masses, etc., especially in developing countries. Due to its importance, financial inclusion is regarded as an enabler of at least seven out of seventeen SDGs. 

Status of financial inclusion

Despite its utility, many people still do not have access to basic financial services and products. According to the latest World Bank data, 1.4 billion people worldwide are still unbanked. This means that they do not have access to basic financial goods and services, which restricts their socio-economic wellbeing and growth. Many reasons can be attributed to financial exclusion. Some of them include income inequality, social discrimination/discrimination on the part of financial institutions, poverty, illiteracy, lack of banks and ATMs, costly financial goods and services, etc. Nevertheless, almost all the nations of the world are endeavouring to achieve financial inclusion through various policy and legal interventions. One of the most interesting mediums, which is of recent origin and has been regarded as having huge potential to lead us towards financial inclusion, is “cryptocurrencies.”

Many researchers have also established a close link between cryptocurrencies and financial inclusion. One such study was conducted by Qureshi and Xiong (2018),  and they found a positive relationship between one cryptocurrency, i.e., Bitcoin and financial inclusion and between financial inclusion and human development.

The study by Qureshi and Xiong used data from a variety of sources, including the World Bank and the Cambridge Centre for Alternative Finance. They found that countries with higher levels of Bitcoin adoption also have higher levels of financial inclusion. This relationship was found to be particularly strong in developing countries, where Bitcoin can provide a valuable tool for people who are excluded from traditional financial services.

In addition to the study by Qureshi and Xiong, there have been several other studies that have found a positive relationship between cryptocurrencies and financial inclusion. For example, a study by the World Bank found that cryptocurrencies can help to reduce the cost of remittances, which can be a significant barrier to financial inclusion for people in developing countries.

These findings suggest that cryptocurrencies have the potential to play a significant role in promoting financial inclusion and human development. By providing a more accessible and affordable way for people to store and transfer money, cryptocurrencies can help to break down barriers to financial inclusion and improve the lives of people around the world.

What is cryptocurrency

Cryptocurrency or crypto, is a digital or virtual currency that provides an alternative medium for transactions of wealth that happen online. This means this mode does not require physical coins or bills and there is no intermediary like a bank to transfer crypto from one person to another. These digital currencies are stored in a digital ledger using encryption algorithms to secure the currency. This digital ledger is called a blockchain and its access is shared with all sanctioned users. The information shared is “transparent, immediate, and immutable.”. Being immutable means the information stored in the blockchain cannot be “tempered with” by anyone. Further, cryptocurrencies represent a decentralised system of wealth transfer. Decentralisation means that unlike the RBI, which controls regular money, cryptocurrencies are not under the control of any authority that could be held responsible for fluctuations in cryptocurrencies. 

How cryptocurrencies may pave the way for financial inclusion

Many believe that cryptocurrencies can revolutionise the financial sector. The various arguments given by the proponents of cryptocurrencies are explained in the below-mentioned points:

Easy access

Accessing cryptocurrencies is easy as compared to the traditional financial system, which is dominated by banks. Cryptocurrencies provide a decentralised and more secure platform for financial transactions, especially in areas that do not have sufficient traditional financial institutions like banks, and hence would help more and more people to have access to financial services, leading to greater financial inclusion. Also, dealing in cryptos is quite easy as compared to the formalities of banks, etc. to access financial goods and services. One does not require a bank, a bank account or other banking formalities to send or receive cryptocurrency. Therefore, the barriers to entering the cryptocurrency ecosystem are fewer as compared to the traditional banking systems and one does not require permission to access and use it. One requires only a smartphone with internet access to  participate in the crypto market, irrespective of background and location.

Source of financial freedom

Secondly, cryptocurrencies provide financial freedom as they do not come under the regulatory framework of any central authority or bank. Therefore, in countries with a corrupt/poor banking system, cryptocurrencies provide an alternate platform for storing and transferring their wealth. The absence of any oversight means that one does not have to rely on intermediaries like banks nor does he have to trust anyone. The trust lies in the algorithms and computers. All this makes cryptocurrencies more inclusive by giving an opportunity to those who are underbanked or unbanked to store and transfer their wealth in a more secure way.

Facilitate economical cross-border transactions

Cryptocurrencies are a faster, cheaper, and borderless mode of wealth transfer. The cost of financial transactions is quite low compared to the traditional banking system. This would enable economically weaker sections of society and small businesses to enter into financial transactions.

More secured transactions

The advocates of cryptocurrencies also say that transactions in cryptos are more secure than transactions through the banking system. Each transaction uses a complex algorithm that is very tough to breach and hence the money in distributed blockchains remains secure.

When a transaction occurs in a cryptocurrency network, such as Bitcoin or Ethereum, the details of that transaction are encrypted using intricate algorithms such as SHA-256 or SHA-3. These algorithms generate unique  hashes, or mathematical fingerprints, for each transaction, making it virtually impossible to tamper with or alter the transaction data without detection.

Furthermore, the decentralised nature of blockchains adds an additional layer of security. In a decentralised system, there is no single point of failure or control, unlike in centralised banking systems. This means that even if a malicious actor were to gain control of a significant portion of the network, they would still be unable to manipulate or compromise the entire system.

Moreover, the transparent and immutable nature of blockchains contributes to their security. Every transaction that occurs is recorded on the blockchain, creating an unchangeable and publicly accessible history. This transparency discourages fraudulent activities and provides a sense of trust and confidence among users.

While no system is completely immune to security risks, the cryptographic algorithms and decentralised infrastructure employed by cryptocurrencies significantly enhance the security of transactions, providing users with a robust and secure medium for exchanging value.

Easy access to financial services

Cryptocurrencies pave the way for easy access to financial services like credit, insurance, interest earning, savings accounts, etc. These services can be provided through various decentralised applications like AAVE, which allow people to earn interest on their currencies or to borrow against their wealth stored in blockchains without having a bank account.  Also, cryptocurrencies are more reliable in maintaining the value of money, especially in unstable and volatile economic conditions. This is because cryptos are not linked to any government or financial institution and, hence, can avert shocks from situations like high inflation.

Eradicate challenges

It is said that there are four basic challenges to achieving financial inclusion, which are – geographic access, cost, scarce financial goods and services, and poor financial literacy. The proponents of cryptocurrencies advocate that cryptocurrencies provide a one-stop solution to all four challenges and, hence, can play a momentous role in achieving the goal of financial inclusion.

Challenges in the way

Besides the proponents of cryptocurrencies, some people have raised questions about the utility of cryptos in achieving financial inclusion. The proponents have been called by different names, like snake oil salesmen and various cryptos have been compared with Ponzi schemes, gambling, etc. The opponents have expressed multiple reasons to be sceptical about cryptocurrencies. They believe them to be costlier than traditional banking transactions and since cryptos are unregulated, the detractors believe that they could be highly volatile and speculative in nature.   Some of the inhibitions about cryptocurrencies are mentioned below.

Misconceived notion of decentralisation

The detractors believe that even though block technology is decentralised, in practice, cryptocurrency markets have become largely centralised. This is because of the emergence of a few cryptocurrency exchanges that have controlled a substantial number of transactions and have become the chief platforms for cryptocurrency transactions. Such a concentration of trading volume may lead to market manipulations, suppress competition, and expose cryptos to more and more cyberattacks.

Financial freedom is a myth

Cryptocurrencies are advocated as free from the control of financial institutions, central banks and other intermediaries. But in reality, several central banks and financial institutions have entered the crypto market to capitalise on the benefits offered by it. It is believed that only Bitcoins, one type of cryptocurrency, are the most decentralised. Other cryptocurrencies, like Altcoin, have become more centralised. Similarly, stablecoins, supported by central banks and government securities, are also intermediated by entities similar to banks. Also, people still require bank accounts to use crypto. Research shows that to buy crypto assets, one has to deposit money in an online account through a debit card or a bank account. In the same manner, a bank account is also required to deposit the cash received from the sale of crypto assets. Therefore, the decentralised nature of cryptocurrencies is nothing but a myth.

Continuation of traditional hierarchies

Cryptocurrencies have created the same kinds of hierarchies, exclusions, and inequalities that existed in the traditional system. This system is not as inclusive as has been proclaimed by the proponents. Most of the benefits of the cryptosystem can be amassed by those who are financially literate (especially crypto literate), who are technologically literate and proficient, who have access to technology like the internet, and who can afford to pay high transaction fees. Crypto asset transactions are not necessarily cheaper than traditional transactions done through banks. Opponents claim that the crypto transaction fee charged by crypto networks is even higher. They charge exorbitant amounts, even for small transactions. Such high fees are more likely to hurt small investors. This may keep low-income people/financially weaker sections out of the reach of the benefits presented by crypto markets. 

Speculative in nature

The speculative nature of the crypto market without a watchdog goes against the concept of financial inclusion. The crypto markets are notorious for problems like “crashes, price volatility, thefts, frauds, etc.” which rebut the claims of crypto advocates that crypto transactions are safe. This puts investors, especially low-income investors, at huge risk, which may further exclude them from the crypto market. The recent failures of crypto markets, the downfall in crypto values, etc. have called for a regulatory system, and as the crypto markets mature, regulatory scrutiny is likely to increase with stringent provisions of prosecution for failure to comply with regulations.

Cryptos do not guarantee financial inclusion

It is also said that cryptocurrencies do not meet the real aim of financial inclusion. Financial inclusion does not only mean providing access to financial services and goods to people; it also aims to make people financially stable and cater to their economic well-being. Whereas, currencies just present an alternate way of financial transaction or speculation with the money people already have through the use of modern technology, which might be more efficient than the traditional banking system. However, there is no scientific proof that cryptocurrencies have provided financial stability to people, reduced income inequality or put more money in people’s pockets, which is the ultimate goal of financial inclusion. 

Therefore, the opponents of the cryptosystem claim that cryptocurrencies will present more problems than solutions. They believe that new technology will perpetuate the already existing cleavages and hierarchies in society, in which benefits will be captured by a few “haves” to the exclusion of the majority “non-haves”. A large section of society, especially in developing countries, is still illiterate, let alone financially literate, poor, and does not have free and cheap access to the internet. These very people are the ones who are unbanked/underbanked and are financially excluded by the traditional financial system and are most likely to be excluded from the benefits that may accrue from the crypto system. The gains from cryptocurrencies will be garnered by the traditional dominant classes and castes who have already benefited from the old financial system. Therefore, crypto currencies are not the ideal solution for ending financial exclusion.


In conclusion, cryptocurrencies do have the potential to expand financial inclusion but at the moment, believing crypto assets to be the panacea for financial exclusion seems premature. While cryptocurrency has the potential to make international money transfers easier and cheaper while also increasing financial inclusion overseas, this does not always imply that it improves financial inclusion at home. This sector still needs to demonstrate that it is assisting unbanked/underbanked people in a better way than the traditional financial sector.

Given the various challenges faced by crypto markets, it is imperative that effective steps be taken to safeguard the interests of consumers, especially low-income consumers. Concerted efforts on the part of policymakers and regulators to set in place a robust regulatory mechanism to avoid issues like fraud, scams, misleading information, etc. that have become synonymous with the crypto ecosystem. However, it is to be seen that regulations need not be too rigid and restrictive, as they will drive people away from crypto if they do not meet the necessary and rigid conditions mentioned under the regulations. Regulations need to be properly designed and well-balanced which will build trust in cryptocurrencies and attract more and more people towards them.

Second, governments, on the other hand, need to work more on promoting literacy, achieving inclusive growth, and spreading modern IT and communication technologies, which will increase the access of marginalised people to the benefits of cryptocurrencies. Interestingly, financial inclusion and inclusive growth go hand in hand and one leads to another. Therefore, governments of nations need to work holistically, covering diverse socio-economic aspects and not only focusing on specific agendas like cryptos to achieve financial inclusion.



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