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Professor Linda Jeng of the Georgetown Institute of International Economic Law was one of three witnesses that testified at the Feb. 14 Senate Banking Committee hearing on crypto, titled "Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets." The goal of the hearing was to discuss the factors that contributed to the bankruptcy filing of major crypto exchange FTX in November and explore what federal regulation of the crypto industry should look like in order to prevent a similar collapse from taking place.
In her testimony, Jeng urged lawmakers to keep in mind that crypto is being used around the world as a bridge to enable more people to access financial opportunities and as a tool to bring aid to communities in need.
"A substantial percentage of adults around the world today lack access to basic banking and financial opportunities... Although lack of access is more significant in developing countries, it is also common in advanced economies," Jeng said in her testimony. "Further, in many places in the world, especially where people are living under authoritarian regimes or suffer from hyperinflation or strife, crypto can provide a lifeline to store value out of the reach of corrupt or poorly run governments. Crypto has also been used as a tool to quickly mobilize resources during times of acute need with examples in Ukraine (following Russia’s invasion), India (for COVID relief) – and even in the last week, in Syria and Turkey (following the devastating earthquakes.)"
Jeng said it was important to contextualize the bankruptcy filing of crypto exchange FTX, calling it "a failure of people, not technology." She said one reason she remains optimistic "about the potential of areas like decentralized finance (DeFi) is because the system is, by design, meant to mitigate potential fallout from centralized, bad actors." She said the industry has "survived the contagion" from events like FTX's collapse specifically because of its decentralized nature, and that decentralization could be "revolutionary" if applied to other industries, like financial services. She said one aspect of crypto that excites her is its "social value in action today." Jeng cited a July 2022 World Bank report which found that approximately 1.4 billion adults around the world do not have bank accounts.
Many people who do not have bank accounts are unable to pay the associated fees or might have a poor credit score, but through DeFi, "unbanked" individuals can access financial services such as borrowing and lending, trading assets and earning interest, according to CoinTelegraph.
An October 2020 report by the Federal Deposit Insurance Corp. (FDIC) found that 5.4% of U.S. households were unbanked, while in Texas, 7.7% of households were unbanked, the Texas Comptroller's Office reported. The report indicated that minority communities were more likely to be unbanked, with 11.4% of black Texas households and 14.5% of Hispanic Texas households being unbanked, compared to 2.5% of white Texas households. More than a quarter of Texas households with an annual income of $15,000 or less were unbanked.
“There’s been a generational lack of trust and inclusion, particularly for people of color and the economically disadvantaged,” said Comerica Bank's Chief Community Officer Irvin Ashford Jr. “Often, bankers aren’t necessarily from the same ethnicity or ethnic background as the community where the bank is located. This distrust of financial institutions has led to other people, such as predatory lenders, coming in to fill the gap, because there will always be a need for people to access financial services.”
An FDIC survey conducted in 2021 found that the most cited reason for a household not having a bank account was "Don't have enough money to meet minimum balance requirements."
In her testimony, Jeng went on to highlight multiple recent crises around the world where crypto was used to provide aid and relief.
In the wake of Russia's invasion of Ukraine, the philanthropic arm of Binance, the world's largest crypto exchange, partnered with international NGOs to launch a crypto-to-cash assistance program, enabling displaced refugees to retain their ability to spend money received through donations without having to pay bank transfer fees or navigate bank shutdowns. Through the program, thousands of refugees could access emergency financial aid by using the first-of-its-kind Binance Refugee Card. One volunteer said in a YouTube video about the initiative that processing donations through traditional banks was a slow process that could take about a week. He said that although of course they were grateful for all donations in any form, "technical superiority" is a benefit that allows donations to be processed and distributed much faster. He also said that the transaction fees associated with crypto are significantly lower than those associated with traditional banks.
After an earthquake devastated Turkey earlier this month, Binance airdropped a total of approximately $5 million in the form of BNB payments worth $100 to all Binance users in the country, according to a Binance blog post. The blog post noted that victims of natural disasters are frequently unable to access traditional banks at a time when funds are critically needed for food, medical supplies and other essentials.
“The recent earthquakes in Turkey have had a devastating impact on so many people and communities," CZ, the Canadian founder and CEO of Binance, said. "We hope that our efforts will bring some relief to those affected."
Binance also launched an Emergency Earthquake Appeal to which anyone could make crypto donations, which were then given to "government-approved NGOs in Turkey and major humanitarian NGOs working on the frontline of the disaster zone in Syria."