Professor Linda Jeng of the Georgetown Institute of International Economic Law recently testified that as federal lawmakers and regulators debate how to proceed with crypto regulation in the wake of the collapse of FTX, they should 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.
Jeng was one of three witnesses who testified at the Feb. 14 Senate Banking Committee hearing on crypto, titled "Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets.”
"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.)
"While the collapse has had devastating effects, we must also keep in mind that crypto is servicing some very real needs around the world. A nuanced and global outlook is key."
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.
In her testimony, Jeng cited a report from the Crypto Research and Design Lab, which found that the average age of a crypto buyer is 38, more than half do not have a college degree, many crypto traders are minorities, and more than a third have a household income of less than $60,000. Jeng then highlighted 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 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 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," Changpeng Zhao, the Canadian founder and CEO of Binance, said in the blog post. "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."
Jeng is a visiting scholar on financial technology at Georgetown, as well as a senior lecturing fellow at Duke Law School. She also serves as general counsel and chief regulatory officer at the Crypto Council for Innovation.
