The Complex Implications of Fintech for Financial Inclusion

Blockchain-based platforms create exciting possibilities for financial inclusion. From a macro perspective, however, these platforms can aggravate systemic risks. Systemic financial instability, in turn, threatens inclusion and sustainability. To foster financial inclusion, we must harness the best of fintech for the provision of banking services and access to credit, while protecting against its challenges to financial systems. Enabling federal regulatory bodies to preserve financial stability may be necessary. But it is just as necessary for lawmakers to digest how blockchain-based markets implicate private-law doctrines: the state-level commercial, property, contract, and entity laws on which market expectations rely. How do we ensure that private-law norms that contribute to systemic stability persist in fintech-enabled markets? Lawmakers’ approaches to this question will affect whether fintech developments fulfill their promise of greater financial inclusion and sustainability. This Article builds upon recent scholarship on fintech, systemic risk, and financial regulation by (i) discussing two ways in which blockchain-based market activity may elevate systemic risk; (ii) contending that increased systemic risk threatens financial inclusion; and (iii) arguing that, as blockchain-based financial activity evolves, we should not overlook the regulatory potential of the private law.