tl;dr: Bank fees, remittance costs, the mortgage crisis, antiquated financial tech stacks, reducing the cost of microfinance, benefits to an open financial stack, decoupling custody from financial innovation
In 2008, I went to India to design a program to disburse microfinance loans using mobile payments. The hope was that mobile money would solve one of the biggest challenges to scaling microcredit: the high, fixed costs of disbursing tiny loans and collecting even tinier payments.
Beyond the sheer technical issues of getting early mobile payments to work, there were a host of regulations — like requirements to find a willing large bank partner — that made it challenging for small companies to launch new financial products.
These requirements were partially driven by the need to ensure that customer funds weren’t lost. But they’d also lock out innovative products and companies, as I’d see both in India — and when advising the Financial Services for the Poor team at the Gates Foundation.
These experiences highlighted the broad need for accessible financial services, like cheap money transfer. It also pointed out the benefits of custody-less financial products, where financial innovation didn’t require risking customer funds. When I first read the Bitcoin whitepaper in 2012 after meeting Coinbase in my Y Combinator batch, this would all click.
Cryptocurrency — and the fintech innovations it is unleashing — also touch a number of other issues in finance.
Before emerging market finance, I had consulted for the largest American banks. I got a mid-row seat to notorious excesses during the mortgage crisis, where financial engineering outweighed solving Main Street needs. Good financial intentions — making the American dream of home ownership real — became a nightmare. This time also laid bare the spaghetti of ancient financial systems that had been cobbled together during the merger boom of post-Glass-Steagall bank consolidation.
Today, I crypto because I think that trustless, decentralized products can (over time) better protect customer funds, while unlocking innovation. I crypto because an open and standardized worldwide financial system means that innovation and useful financial products are not locked up in large financial institutions — or first world countries. I crypto because we need financial innovators that solve retail needs — and anticipate potential issues in advance.
What’s your story? #WhyICrypto