DeFi Proponents Unveil $30 Billion Plan to Combat Global Poverty
A growing coalition of decentralized finance (DeFi) advocates has proposed a novel initiative aimed at alleviating the financial burden on low-income households worldwide. The DeFi Education Fund (DEF) and several influential crypto policy groups argue that DeFi instruments can save people up to $30 billion annually in fees, currently lost to the “poverty premium.”
The term “poverty premium” refers to the disproportionate costs of financial services for low-income families, despite technological advancements. According to DEF’s Jen Rosenthal, DeFi can potentially solve this issue. A recent tweet by the DeFi Education Fund (@fund_defi) highlights the possibility of DeFi as a solution, stating “Why do the costs of U.S. financial services continue to rise for low-income families despite technological advances?”
How Long Can the Poor Afford an Expensive Financial System?
The renewed push for DeFi adoption comes as global poverty rates remain stubbornly high. According to updated estimates, approximately 808 million people will be living in extreme poverty by 2025, surviving on less than $3 a day. Another 887 million are considered to be living in multidimensional poverty, facing overlapping pressures such as climate-related disasters, political instability, and economic fragility.
Source: pip.worldbank.org
The DeFi Education Fund argues that the financial system itself is part of the problem. A new study released this year highlights the long-standing cost gap between rich and poor households in the United States. Approximately 5.6 million U.S. households remain unbanked, and another 14.2% are underbanked, often forced to rely on costly financial alternatives.
DeFi as a Solution
Cashing a paycheck can cost up to 5% of its value, and fees eat up an average of 7.1% of annual income for low-income families, compared to just 0.2% for wealthier households. DeFi infrastructure could reduce global remittance costs by up to 80%, potentially saving the world’s unbanked population $30 billion per year.
Source: DEF
A DEF poll conducted with Ipsos found that 42% of Americans would likely try DeFi services if a new law clarifying crypto privacy was passed. Many respondents expressed frustration with delays in banking transactions, unexpected fees, and difficulties accessing their own funds.
As DeFi’s Role in the Real World Expands, DEF Accelerates Advocacy in Washington
In addition to its economic arguments, the DeFi Education Fund has expanded its political efforts in Washington. The organization launched the DeFi Education Foundation, a nonprofit aimed at expanding its advocacy and deepening collaboration with lawmakers.
DEF and Andreessen Horowitz (a16z) called on the U.S. Securities and Exchange Commission to create a regulatory “safe harbor” for blockchain applications. They argued that neutral software interfaces should not be classified as brokers and warned that current interpretations risk forcing developers into unintended regulatory roles and hindering innovation.
As the debate over the long-term value of DeFi continues, advocates point to practical examples of how digital tools can expand access to financial services. In Nigeria and parts of East Africa, crypto-based networks allow users to transact with or without smartphones.
Source: Poverty & Inequality Platform (PIP)
Some humanitarian groups have adopted blockchain systems to distribute aid more transparently. Nevertheless, researchers note that DeFi has its limits, including collateral-heavy lending models, volatile token markets, smart contract vulnerabilities, and barriers to financial literacy.
DEF believes policymakers should protect the aspects of DeFi that directly reduce costs for consumers. The group argues that open access, low-cost processing, and user control remain crucial to reaching people living on the financial margins.
Read more about the DeFi Education Fund’s proposal and the potential of DeFi to combat global poverty at https://cryptonews.com/news/defi-advocates-propose-30b-plan-to-fight-global-poverty/
