Bridging the gap: Financial inclusion and the crypto revolution

This year’s International Women’s Day theme is “Inspiring Inclusivity” and financial inclusion is a key aspect.

The World Bank defines financial inclusion as individuals and businesses having “access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way”.

Empowering women economically can foster economic growth and create a stronger society by improving and reducing societal inequalities, including to essential services such as healthcare and education and opening up new opportunities from work to entrepreneurship.

However, based on current statistics, when it comes to financial inclusion and the gender wealth gap, we fall glaringly short. Data from the Global Financial Inclusion (Global Findex) database shows that women make up a disproportionately large share of unbanked adults worldwide. In the UK, men have on average £92,762 ($117,636) more in total wealth than women, a gap of 35%; by the age of 64, the average gender wealth gap is 42% and men hold nearly three times the value of UK shares that women do. (See Why taxation of wealth is a feminist issue)

So how do we inspire financial inclusivity this International Women’s Day, and could blockchain be the key?

Blockchain: A catalyst for financial inclusion?

The Global Findex Database 2021 reported that technology is helping drive inclusive access to finance for younger women in developing economies. Blockchain technology has also emerged as a potential game-changer in the quest for financial inclusion. Blockchain’s key tenets of decentralisation, transparency and trust make it ideal for overcoming traditional barriers that exclude certain demographics from mainstream financial systems.

Cryptoassets and cryptocurrencies, powered by blockchain, offer borderless and low-cost transactions, enabling access to financial services for the unbanked or underbanked populations, which disproportionately include women in many regions. Decentralised financial services (DeFi) have created new opportunities for strengthening female economic participation and wealth, for example, through innovations such as decentralised peer-to-peer lending protocols which can provide access to credit where access may otherwise have been limited or non-existent.

Smart contracts, a feature of blockchain technology, can automate financial processes, reducing the need for intermediaries and lowering transaction costs. This can be a game-changer for microfinance initiatives, providing efficient and cost-effective services to individuals who were previously excluded from traditional financial systems.

The conversion of rights to an asset into a digital token on the blockchain through tokenization creates new opportunities and access points for women.

The conversion of rights to an asset into a digital token on the blockchain through tokenization creates new opportunities and access points for women who have historically had more limited access to traditional assets such as real estate or equities. Blockchain tokens can also democratise the ownership of businesses by issuing tokens or through structures such as DAOs (Decentralised Autonomous Organizations which utilise blockchain technology to distribute the ownership and control of an organization to its members).

Similarly, the ability to tokenise creative works and other assets such as art, through NFTs and other tokens, means that female artists and creators can ensure that they retain rights and receive royalties long into the future.

The blockchain space has also empowered a new wave of entrepreneurs by sparking novel ideas and innovation and creating new opportunities for businesses to build and scale, enabling entrepreneurs to raise finance through token issues, blockchain-based crowdfunding and other innovations.

While blockchain and cryptoassets offer unprecedented opportunities for financial inclusion, they also come with inherent risks. Price volatility, security concerns, and potential misuse in illicit activities are challenges that need to be addressed and which are currently being scrutinised through a package of regulatory measures in the UK and elsewhere. Educating users and implementing robust security measures are also imperative to mitigate these risks.

While blockchain represents a new opportunity to improve financial inclusion, with a growing number of women investing and trading cryptocurrencies and increasing in number in the blockchain industry workforce, there is still much work to be done to prevent ongoing biases and discriminatory behaviors from erecting new barriers to women in the industry.

Like many other tech-led industries, women have fallen behind somewhat. Statistics show that just 3% of Web3 companies have an all-female founding team; a mere 13% of crypto businesses include female founders and only three of the leading 50 crypto and blockchain companies have female CEOs. (See Boston Consulting Group – Feb 2023 – “Web3 Already Has a Gender Diversity Problem”; Women in Crypto)

If you are a female founder in Web3, the funding statistics are less than ideal. All male founder teams raise on average four times more than all female teams (a figure of c$30m compared to $8m). Among companies that have raised more than $100m, the % with all-female founding teams is ZERO.

The way forward

Blockchain and crypto presents a unique opportunity to reshape the global financial landscape and for women in particular, improve financial inclusion, providing a chance to break free from traditional constraints and actively participate in economic activities and raise capital for business ventures that may have been inaccessible or challenging to access previously.

Embracing the potential of blockchain and crypto with a view to improving financial inclusivity will require a conscious effort to remove age-old discrimination and responsibly build a more inclusive financial ecosystem from the ground up that empowers individuals, transcending gender and socio-economic barriers, and propelling us towards a more equitable future.

Jessica Lee is a partner in the Litigation & Arbitration Practice Group at Brown Rudnick. Jess has a particular interest in digital asset disputes and is regularly invited to speak and write on issues including crypto fraud and blockchain disputes and regulation. She is also a keen advocate for diversity and social mobility; she is part of the leadership team for the Firm’s Women’s Initiative and has mentored younger lawyers and law students, including on the IntoUniversity programme.