Financial Inclusion and Tokenization: The Policy Debate Between Promise and Reality

The financial inclusion argument is crypto’s most rhetorically powerful claim and its most contested empirical one. “1.4 billion people are unbanked,” the argument begins — and this is true, according to World Bank Findex data. “Crypto can reach them without requiring a bank account or physical infrastructure,” it continues — and this is also, in limited circumstances, true. “Therefore, crypto regulation should be permissive to allow this innovation to flourish” — and this is where the political economy analysis begins, because the leap from genuine inclusion potential to specific regulatory conclusions is where interested parties have the most influence.

Understanding which inclusion arguments are substantiated by evidence, which are speculative, and which are strategically deployed by commercial actors who benefit from favourable regulation requires disentangling the genuine public interest case for financial inclusion from the industry’s use of that case as a lobbying tool.

The World Bank Data and What It Shows

The World Bank’s Global Findex database, updated every three years, is the authoritative source for global financial inclusion statistics. The headline figure — approximately 1.4 billion adults without access to a bank account, concentrated in Sub-Saharan Africa, South and Southeast Asia, and parts of Latin America — establishes the scale of the problem.

But the Findex data also reveals why the unbanked are unbanked, and those reasons matter for evaluating crypto’s inclusion potential. The primary reasons people cite for not having bank accounts are: insufficient funds to meet minimum balance requirements, the cost of fees, lack of documentation required for account opening, distance from a bank branch, distrust of financial institutions, and lack of need because a family member already has an account. Cost and documentation are the most economically actionable of these barriers — they are things that financial technology can meaningfully address.

Crypto addresses the documentation and account opening barriers reasonably well: a cryptocurrency wallet requires no identity documentation and no minimum balance. It addresses the distance barrier for digital payments: a smartphone with internet access enables crypto transactions anywhere with connectivity. It does not necessarily address the cost barrier: transaction fees on major networks during peak periods have been prohibitively expensive for the small-value transactions that characterise low-income financial lives.

This suggests a conditional inclusion thesis: crypto can provide meaningful inclusion benefits in specific circumstances — where traditional infrastructure is genuinely absent, where connectivity exists, where transaction costs are manageable, and where the local financial system offers alternatives that are demonstrably worse. Those circumstances describe some markets better than others.

Genuine Crypto Use Cases: Nigeria, Philippines, El Salvador

Nigeria provides one of the clearest examples of genuine crypto inclusion utility. Nigeria’s peer-to-peer Bitcoin market — among the largest globally by trading volume for several years — developed in response to a specific failure of the traditional financial system: the CBDC (eNaira) adoption being low, dollar access being restricted by central bank policy, and inflation eroding the naira’s value. Nigerian users adopted USDT and other dollar stablecoins as a store of value and exchange medium because the available alternatives — a weakening naira and a restricted dollar banking system — were genuinely inferior.

This is inclusion in a meaningful sense: people using a financial tool that serves their needs better than the available alternatives, without requiring a bank relationship. The inclusion is not achieved by crypto’s superior technology per se — it is achieved by the combination of that technology and the specific failure mode of Nigeria’s monetary system.

The Philippines presents a different inclusion use case: remittances. The Philippines receives approximately $36 billion in remittances annually, representing over 9% of GDP. Traditional remittance channels — Western Union, Money Gram, bank wire transfers — charge fees of 6-8% on average, extracting billions from the income of overseas Filipino workers. Crypto remittance platforms, including GCash and Maya (which integrate crypto into mainstream payment apps), have provided measurably lower-cost remittance pathways for specific corridors.

El Salvador’s Bitcoin legal tender experiment (2021) is the most discussed and least successful example of government-mandated crypto inclusion. Despite the legal tender status and the government-issued Chivo wallet with a $30 Bitcoin credit for new users, adoption remained low for regular payment purposes. Most Salvadorans who received Bitcoin through Chivo quickly converted it to dollars, and usage for everyday payments declined sharply. The experiment demonstrated that making crypto legal tender does not create genuine inclusion if the underlying causes of financial exclusion — fees, documentation requirements, distrust of novel instruments — are not addressed.

The Political Use of Inclusion Arguments

Financial inclusion is the most politically powerful argument available to crypto advocates in Washington and in international regulatory forums for a simple reason: it invokes a genuine global justice concern. Opposing measures to help the 1.4 billion unbanked is politically difficult; supporting permissive regulation on inclusion grounds is politically easy. This makes inclusion arguments valuable regardless of their empirical strength — they shift the burden of proof onto regulators to demonstrate that their restrictions don’t prevent genuine inclusion benefits.

The deployment of inclusion arguments by industry lobbies follows a consistent pattern. When the Blockchain Association opposes a regulatory requirement, the testimony often includes references to the unbanked populations who might be excluded from innovative financial services by excessive regulation. When crypto venture funds argue for permissive stablecoin regulation, they point to remittance use cases in emerging markets. When exchange operators argue against AML compliance requirements, they note that strict identification requirements exclude populations without formal identity documents.

These arguments are not dishonest — the inclusion use cases they describe are real. But the regulatory conclusion does not follow automatically from the inclusion premise. A KYC requirement that excludes some unbanked people also excludes money launderers and sanctions evaders; the question is whether the exclusion cost to genuine inclusion users is justified by the financial crime prevention benefit. Industry’s use of inclusion arguments systematically emphasises the cost and minimises the benefit on that trade-off.

CBDC Inclusion Potential: India’s Digital Rupee and Nigeria’s eNaira

Central bank digital currencies have been explicitly framed as inclusion tools by governments in large developing economies. India’s Reserve Bank launched the Digital Rupee in 2022 with inclusion rhetoric: a digital rupee accessible without a bank account could bring formal financial services to India’s hundreds of millions of unbanked adults.

The early results have been mixed. The Digital Rupee has seen modest adoption — primarily among digitally sophisticated urban users rather than the unbanked rural population it was designed to reach. The barriers that prevent the unbanked from having bank accounts (lack of smartphones, limited connectivity, distrust of formal institutions, inadequate financial literacy) also impede CBDC adoption.

Nigeria’s eNaira — launched in 2021 as one of the world’s first retail CBDCs — had similarly disappointing inclusion results. Despite reaching a country with millions of unbanked adults and a government committed to the inclusion mission, eNaira adoption was far below targets. The irony is that Nigeria’s P2P crypto market, which operates without government promotion, achieved far greater adoption among the same population that ignored the government’s CBDC.

The lesson is that financial inclusion requires more than a digital instrument — it requires that the instrument address the actual barriers users face. Unhosted crypto wallets, which require no documentation and have lower onboarding friction than either bank accounts or regulated CBDCs, have succeeded where more formally structured options failed precisely because they remove the friction points that exclude the poorest users.

Evidence on Actual Inclusion Outcomes

The evidence on crypto’s actual inclusion outcomes is mixed enough that honest advocates acknowledge genuine uncertainty. Where crypto adoption has occurred in emerging markets, speculation often dominates over genuine transactional utility: the populations using crypto are frequently using it as a speculative asset, holding it in hopes of price appreciation, rather than as a stable medium of exchange or savings instrument.

High volatility is the fundamental problem. A financial inclusion tool that can lose 50% of its value in a month is a speculative instrument, not a stable store of value or reliable payment medium for people living close to subsistence. Dollar-pegged stablecoins address this volatility problem but introduce reliance on the dollar’s stability and on issuers’ commitment to maintaining the peg — both of which carry risks that regulators and financial stability bodies have documented.

Policy Design: Capturing Benefits While Limiting Speculation Risks

The policy design question is whether regulatory frameworks can be structured to encourage genuine inclusion use cases while limiting the speculative and illicit finance risks that accompany permissive regulation. This is harder than the either/or framing that dominates political debate suggests.

Tiered KYC requirements — lighter compliance requirements for small-value transactions, stricter requirements for larger amounts — can preserve inclusion access while maintaining anti-money laundering coverage for the amounts that pose genuine financial crime risks. Most FATF recommendations and the GENIUS Act’s approach to stablecoin compliance include tiered structures on this principle.

Geographic targeting of inclusion support — focusing regulatory pilots and development resources on markets where the need is genuine and the existing alternatives are demonstrably poor — is more likely to produce actual inclusion than blanket permissive regulation in markets where the primary effect is speculation. India’s interest in lower-friction Digital Rupee onboarding for rural areas, targeted at specific documented barriers to financial access, is more likely to produce measurable inclusion than a globally uniform permissive framework.

The financial inclusion promise of crypto and tokenization is real enough to take seriously and contested enough to require evidence-based evaluation. The political economy of inclusion arguments — where the same argument serves both genuine public interest and commercial lobbying interest — requires analysts to separate the empirical claim from the policy conclusion that industry advocates want drawn from it.