tl;dr: UMA, MakerDAO, and Hydro walk the walk of financial inclusion with the release of the USStocks token.
One of the key phrases of the crypto movement is “financial inclusion.”
Given the world of reinforcing bubbles in which many of us live these days, it’s sometimes difficult to remember and appreciate that there are 2 billion people in the world with no bank account.
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That means they have no access to the existing financial system. They can’t use a credit card at a store, buy property, of buy things on eBay.
Inclusion Means Access
But “financial inclusion” is more than “banking the unbanked.”
Let’s say that you are bullish about the growth prospects of, say, Vietnam.
Or perhaps you suspect that real estate in southern France will be more valuable in the future.
If you wanted to engage in those markets, you might be able to, but you might not. Even if you wanted to, there may be too much friction, too much cost, and too little transparency.
For Americans, in particular, it may be challenging to be mindful of the fact that there are over 4 billion people in the world who cannot easily access the US stock market.
While some wealthy non-Americans have accounts with brokerage firms, there is a barrier and it is expensive.
However, if you are a middle manager in Argentina or Turkey or Nigeria and you want to invest for your family’s future, the option just isn’t there easily and cost-affordably.
Democratizing Access to the US Stock Market
The teams at UMA and MakerDAO have partnered to create a crypto asset (a token) that mirrors the effect of owning the S&P 500 index.
Available on DDEX (a project on top of Hydro), anyone with crypto can use their DAI stablecoin to purchase this index.
So, now, the middle manager in Argentina or Nigeria can use the crypto the s/he has in her phone and diversify their portfolio to include the US stock market.
Since DAI aims to be a stablecoin that is pegged 1–1 with USD (and for now, it is), the value of the asset is only subject to the volatility of the US stock market not the crypto market as well.
Bottom line: the advice that every American investor gets “put some money in an S&P 500 index fund” is now actionable globally, without the need for a brokerage account, high fees, or dare I say, even a bank account.
Global Financial Inclusion Starts Somewhere
This may not seem like a huge deal and I’m not saying that it’s like the discovery of electricity either.
However, what I am saying is that these types of assets are made possible only through the existence of permissionless, decentralized protocols and exchanges.
An entirely new type of market actor can now allocate their resources as they see fit.
It’s important to remember the human side of this crypto revolution. Give people more choices about what to do with their money and assets and let them make the decision that is best for them.
Kudos to the teams at UMA, MakerDAO, and Hydro for delivering on that promise.
One Small Step Towards Financial Inclusion was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.