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01 / 05
The Promise of Cryptocurrency | Podcast Highlights

Blog Post | Financial Market Development

The Promise of Cryptocurrency | Podcast Highlights

Chelsea Follett interviews Jack Solowey about the potential benefits of cryptocurrency and the regulatory challenges it faces.

Jack Solowey —

Listen to the podcast or read the full transcript here.

Let’s start with the big picture. What is cryptocurrency? 

Cryptocurrency is an application of blockchain technology that leverages cryptography and game theory to create public digital ledgers that are highly secure and highly resistant to tampering. In its best form, cryptocurrency could replace the traditional balance sheets at institutions like banks and brokerages with this open distributed ledger. You’d have something like a bank account balance, but rather than being managed by a centralized intermediary, it’s run by computers all over the world that are incentivized to maintain the database and check each other’s work.

What are some of the benefits of cryptocurrency? 

Crypto is relatively young, so a lot of the benefits are potential benefits. However, we do already see use cases around the world.

Vietnam is one example. The blockchain analytics firm Chainalysis publishes an annual survey of the leading countries for crypto adoption, and Vietnam has led that list for a couple of years. An interesting corollary is that 69 percent of Vietnam’s population lacks access to a traditional bank. I think it’s reasonable to say that cryptocurrency is filling that need.

Can cryptocurrency be a hedge against inflation? 

Ultimately, this is an empirical claim that will have to be evaluated over time. There was some thinking initially that Bitcoin could be an inflation hedge because it has an ultimate cap on its supply. According to the protocol, there will only ever be 21 million Bitcoin minted. But that hasn’t borne out empirically, or at least hasn’t borne out yet.

With that said, there are places around the world where we’ve seen both national currency depreciation and relatively high crypto adoption or spikes in crypto adoption around national currency depreciation events. Examples include Turkey, Nigeria, Kenya, Argentina, and Venezuela.

There’s also a class of crypto token known as stablecoins, which are designed to be pegged to the value of another asset, for example, fiat currencies like the US dollar. Stablecoins have actually been growing in popularity in some of the same countries I just mentioned as a way to access the US dollar.

What about the potential of blockchain technology to combat censorship or resist authoritarianism? 

I think it’s helpful to look at the tactics that are used by the totalitarian regime in George Orwell’s Nineteen Eighty-Four. In that story, control was often a matter of changing and deleting the historical record. The thinking is that if there was no evidence of a free society, the idea of freedom or liberty could be extinguished.

And as we know, totalitarian regimes are not mere fiction. The Cato Institute recently awarded the Milton Friedman Prize to Jimmy Lai, who was the founder of the pro-democracy Apple Daily Newspaper in Hong Kong. When the central government in Beijing applied the draconian national security law to Hong Kong and raided the Apple Daily offices, civic and cyber activists were able to maintain a record of thousands of Apple Daily newspaper articles on a blockchain called Arweave. That is one example where blockchain technology thwarted the Orwellian authoritarian ambition.

What are some of the challenges or potential drawbacks of cryptocurrency? 

Like all financial instruments, crypto can be abused by bad actors, who can use cryptocurrencies to fund terrorist activity and trafficking. However, it’s important to keep this in perspective. Even high estimates of crypto-related illicit activity are an order of magnitude smaller than the UN’s estimate of, for example, total global money laundering each year, and law enforcement agencies in the US acknowledge that crypto has a relatively small role in crime when compared to traditional financial technologies.

Another common critique is that cryptocurrency technology is bad for the environment. 

It’s worth distinguishing here between the two mechanisms underlying major blockchains. You have Proof of Work, which helps secure the Bitcoin network, and because it’s compute-intensive, it’s also electricity-intensive. However, there’s also a different mechanism known as Proof of Stake, which has been implemented by the Ethereum blockchain, the second biggest crypto network by market cap. Proof of Stake reduces energy consumption and carbon footprint by over 99 percent. So, some of the critique needs to adapt to the changing nature of the technology.

But I also think it’s important to keep in mind that this critique begins with the assumption that cryptocurrency is not worth its environmental footprint. I think the role of policymakers is to address downside risks, not to assess the benefits. Regardless of one’s preferred environmental policy, it should apply uniformly and should not single out one specific class of technology.

If cryptocurrency is overregulated, what could be the possible impact of that on the average American? What’s the potential loss there? 

If our policies make the US an uncommonly inhospitable place for crypto, we could lose both the potential gains from this class of technology and the competitive pressure that these innovations put on traditional institutions to improve their own products and services. Crypto is already a very useful tool for sending payments across borders quickly and cheaply.

There are two big problems with how regulators have been approaching this space. One is regulatory ambiguity. Securities laws in the US, at the federal level, are almost 100 years old. It’s not hard to conceptualize how technologies that began as paper stock certificates and are now being replaced with decentralized global networks could pose challenges to existing regulations.

In the 1990s, the SEC actually had a fairly rational rule-making process to adapt laws to new technologies, what are known as alternative trading systems. Laws and rules can keep up with technology if regulators are willing to make those changes. Unfortunately, in the US, we haven’t seen the SEC take the same rational approach to cryptocurrency.

In fact, we’ve seen a bit of gaslighting, where the agency can ask projects to register under existing laws, and the project will say, “Okay, great. Let’s do it.” And then SEC says, “Well, we’re not really sure how to register your project.” And then, a little bit later, the project faces enforcement actions for not registering. It’s not a rational approach to innovation and financial markets.

As of the time of this recording, what are some of the current policy initiatives around regulating cryptocurrency? What are some of the concerns people are wrangling with?

The US is unique in that we have two capital market regulators, the Securities and Exchange Commission, SEC, and the Commodity Futures Trading Commission, the CFTC. This presents an interesting question about cryptocurrencies: should they be treated as a commodity or security?

To answer that question, my colleague Jennifer Schulp and I hone in on decentralization. Decentralization addresses some of the risks that securities regulation is intended to mitigate, which are known as managerial risks. Basically, are the issuers of an instrument going to have information that market participants don’t have, and could they use that information to gain an edge over market participants? Things like insider trading and information asymmetries through disclosures. But when you have a fully decentralized crypto token project, there is no managerial body with that information. So, at a high level, crypto securities are those that are centralized, and crypto commodities are those that are decentralized.

One wrinkle here is that crypto tokens can begin life as centralized projects but evolve into more decentralized projects over time.

Say regulators get this right and allow people to realize all the potential gains of cryptocurrency. What kind of gains could people see? 

In addition to the potential benefits of faster, cheaper payment methods, cryptocurrency promises a more decentralized internet and financial system. Loans could be issued permissionlessly. In the same way that you put a dollar in a vending machine to get a can of soda, you could have lending protocols that, once you put in the designated crypto collateral, you could take out a loan in crypto without some of the traditional gatekeeping by financial institutions. And that’s just one example of this broader ecosystem.

Banco Bilbao Vizcaya Argentaria | Charity & Aid

1.1 Million Mexicans Lifted Out of Poverty Thanks to Remittances

“During the first nine months of 2025, remittances to Mexico totaled 45,681 million, 5.5% less than the 48,360 million received during the same period in 2024.

Despite this decrease, remittances increased in several states in the central-southern region during the first nine months of the year, notably Chiapas (+1.2%), Oaxaca (+2.0%), Puebla (+1.9%), Guerrero (+4.2%), Veracruz (+0.9%), and Morelos (+1.3%).

1.1 million people in Mexico have been lifted out of multidimensional poverty thanks to remittance transfers. If remittance income is not included in the 2024 measurement, the population living in poverty in Mexico would increase from 38.5 million to 39.6 million people.”

From Banco Bilbao Vizcaya Argentaria.

Blog Post | Globalization

Remittances and Our Freedom to Give

A crucial alternative to foreign aid is being threatened.

Camille Miner —

Summary: Remittances are a lifeline for millions around the world. Unlike foreign aid, these funds cost taxpayers nothing and flow directly to those who need them most, improving health, education, and opportunity. Yet new proposals to tax and restrict remittances threaten this vital support system. Reducing the freedom to give across borders would needlessly destroy opportunities for crucial economic development.

Remittances, the funds immigrants send to family members in their countries of origin, are under political fire. Many US policymakers favor taxing these payments and placing bureaucratic hurdles in the way of those trying to send money home. The rationale? Keep more money circulating in the US economy. It’s a seductive argument for many. Yet this idea is not only shortsighted but harmful.

First, consider the scale of these payments. The average global migrant worker sends 15 percent of their salary back home. That is only about $250 every 1 to 2 months, but it represents one-half the average monthly salary after tax of a worker in El Salvador, and just above the average monthly salary of a worker in Bangladesh. Thus, the flow of cash from a migrant worker can determine who back home can afford a metal roof, a well, pavement, nutritious food, payment of debt, medical coverage, or education. 

The United Nations estimates that one billion people worldwide either pay or receive remittances. The World Bank anticipates that global remittance payments sent to low- and middle-income countries (LMICs) will total $690 billion by the end of 2025. The amount of money sent by migrants more than tripled global foreign aid money in 2021. 

Personal Remittances, Received (Current US$)

Unlike foreign aid, remittances don’t cost US taxpayers a dime. According to Robert Stojanov and Wadim Strielkowski, remittances are absorbed nearly twice as effectively as official development assistance, or foreign aid for development. The absorption rate represents how effectively money is used and traded in the economy it enters. In other words, money given by remittances is often more effectively used in local developing economies than money provided through foreign aid.

Remittances are especially important for families because they can reduce child mortality and child labor. When parents receive steady financial support from family members abroad, they are better able to support their children and afford medical care for them. The children, in turn, are less burdened by the need to work and can attend school.

Remittances are also crucial in times of economic uncertainty. During the COVID-19 pandemic, remittances accounted for more than 30 percent of the gross domestic product (GDP) for The Gambia and Lebanon, providing essential support for recipients and boosting local economic activity.

In the early 2010s, internet and mobile phone access were still limited in many developing countries. However, in just the past decade, the world has seen a 30 percent increase in internet users worldwide, and the World Bank estimates that 84 percent of people in developing countries own a mobile phone in 2025. Importantly, the adoption of mobile phones correlates with the adoption of mobile money accounts, facilitating millions of remittances.

Western Union is the dominant remittance handler in the developing world and has historically used its comfortable market share to impose high fees to transfer remittances. However, because of the spread of mobile devices in the developing world, fintech companies such as Wise and Remitly have since entered the remittance market, offering users lower transfer fees and forcing Western Union to lower its fees in turn.

Prior to the information age, most of Africa suffered from a lack of financial infrastructure, such as automated teller machines (ATM), banks, and tellers. However, since the distribution of mobile devices, companies such as Wave and M-PESA have experienced strong adoption of mobile remittance transfers. These mobile money payments, like those traditionally handled by Western Union, reduce poverty and income inequality in developing countries, but with much lower transfer costs and infrastructure needs. 

Remittances also represent an essential human freedom: the right to give. Just as Americans can freely send money through Venmo and Zelle without government interference, individuals who transfer funds internationally should enjoy the same freedom. However, the recently passed One Big Beautiful Bill Act will put a 1 percent excise tax on remittances.

A world with greater freedom and improved economic development demands that all people are free to send and receive money. As calculated by the Center for Global Development, “for many low- and middle-income countries, the impact of the remittance tax far outweighs the impact of known US aid cuts conducted so far.”

During an interview with me, Helen Dempster of the Center for Global Development stated that a remittance tax could decrease remittances themselves. This decrease in transfers may incentivize banks and lenders to charge higher fees. According to Dempster in the interview on July 4th, 2025:

There’s been a campaign for 20 years now to reduce the cost of sending remittances and many remittance service providers, particularly the large ones like Western Union, are keeping fees stubbornly high. I think if they wanted to keep fees low to encourage remittances, they would have reduced their fees by now. So, my sense is that they will pass the whole amount of the cost on to consumers.

Because of this tax, some of the most powerless individuals will suffer the cost, and the US will earn negligible revenue. As we’ve seen in past decades, greater freedom to migrants and competition between lenders directly improve the lives of the global poor. Ultimately, preserving our freedom to give not only protects our human rights, but positively transforms the day-to-day lives of millions and the future of the developing world.

World Bank | Financial Market Development

Financial Account Ownership Increased by 5 Percent Since 2021

“Ownership of financial accounts increased globally by 5 percentage points between 2021 and 2024 and by 6 percentage points in low- and middle-income economies, in which 75 percent of adults now have an account. 

Account owners increasingly use their mobile phones or debit or credit cards connected to their accounts to make transactions. More than half of all accounts in low- and middle-income economies are digitally enabled in this way.”

From World Bank.

World Bank | Financial Market Development

Mobile-Phone Technology Powers Saving Surge in Developing Economies

“More adults than ever in low- and middle-income countries now have bank or other financial accounts, leading to a rise in formal saving, according to the World Bank Group’s Global Findex 2025 report. This momentum in financial inclusion is creating new economic opportunities.  Mobile-phone technology played a key role in the surge, with 10% of adults in developing economies using a mobile-money account to save—a 5-percentage point increase from 2021.

In 2024, 40% of adults in developing economies saved in a financial account in 2024—a 16-percentage-point increase since 2021 and the fastest rise in more than a decade. Higher personal saving—through banks or other formal institutions—fuels national financial systems, making more funds available for investment, innovation, and economic growth. In Sub-Saharan Africa, formal savings increased by 12-percentage points to 35% of adults.”

From World Bank.