The World Economic Forum is bearish on cryptocurrency, and believes stablecoins in-particular could widen the gender gap and increase “inequality in financial services.”
“Rather than strengthen equality, it is possible that stablecoins and their surrounding ecosystems and infrastructure, as well as blockchain-based financial applications in general, could widen the ‘digital divide’ and ‘gender gap’ in access to financial services,” writes the organization in a new white paper titled What is the Value Proposition of Stablecoins for Financial Inclusion?
“Early research indicates that users of cryptocurrency currently tends to be young, educated, male individuals who are already experienced in digital finance. Unless the ecosystem focuses deliberately on building inclusive models at scale, this trend may continue and stablecoins may risk increasing inequality in financial services and technology access, rather than addressing it.”
One of the main justifications for stablecoins as a store of value is hyper-inflation. The Peter Thiel and Coinbase-backed blockchain startup Reserve Protocol, for instance, has centered its entire case study on Venezuela, creating a digital stablecoin pegged to the U.S. dollar that is framed as a solution for Maduro disastrous monetary policy.
The World Economic Forum, however, does not buy this line of thinking.
“Stablecoins might offer an easy and helpful way for an individual in a country experiencing high inflation to save funds in a hard currency such as the US dollar or Euro,” writes the organization. “That said, this ability may not be available at scale as it would entail a movement by citizens out of the domestic currency into the hard currency, which could lead to a currency crisis and escalate the price of citizens to purchase the hard currency using the local currency (as the value of the local currency relate to the hard currency would continue to decline).”
The World Economic Forum argues that stablecoins “are subject to many of the same barriers that constrain citizens from accessing financial products and services,” adding that limited Internet access remains a hurdle for unbanked users, along with the lack of “digital, financial, and general literacy.” The organization notes that many cryptocurrency exchanges require identity and KYC documents for verification purposes, which unbanked individuals often lack.
“It is is conceivable that DeFi may provide value to the financially underserved in the future, although the relative benefits and risks will need to be assessed as the space develops, and their value-add relative to centralized financial services, assuming regulatory compliance, is not clear.”