Open Systems and Financial Inclusion: SDF’s Treasury Response

The Stellar Development Foundation (SDF) recently submitted a letter in response to a Request for Information on Financial Inclusion (RFI) issued by the U.S. Department of the Treasury (Treasury). This response blends our work on financial access with our continued efforts to advocate for open systems. By combining these two focus areas, SDF aims to inform Treasury’s development of a national strategy for financial inclusion from a technological perspective – emphasizing that tools to further financial access and inclusion can benefit from open-source and transparent technology. In our response, we address two key points: the importance of access when defining financial inclusion and how to leverage technology to advance financial inclusion efforts.

SDF defines access as a core tenet for the advancement of financial inclusion. Access to formal financial systems, such as bank accounts, is crucial for individuals, households, and small businesses to participate in the increasingly digital economy and unlock advanced services like savings and lending. We propose that consumers should have access to free or low-cost products that support everyday financial transactions in today’s cashless economy. Services that leverage digital wallets and blockchain technology can address traditional barriers like minimum account balances and account fees that preclude participation in the formal economy. As a public and freely accessible blockchain, the Stellar network provides a rich environment and set of technical tools for such everyday financial services.

Our response also supports the use of innovation like smart contracts to empower individuals. Smart contracts are self-executing code on digital ledgers that operate as automated "if/then" statements, functioning without the need for intermediaries. This innovation enables consumers to access financial services without relying on legacy actors that have historically excluded certain communities.

Open-source code plays a crucial role here. Open-source smart contracts allow for transparency and collaboration, enabling developers to review and modify source code freely. In the financial services industry, the use of open-source code promotes trust and security by allowing users to verify the integrity of the code and detect vulnerabilities. This transparency is particularly important given the sensitive nature of financial transactions and the potential for new trust gaps to form from unverifiable code written behind closed doors.

Our response also highlights the significance of open data to further financial inclusion efforts. For example, Brazil’s open banking initiative allows customers to opt in and permit their bank to share financial data like transaction history with independent third-party providers. Through application programming interfaces, banks and fintech firms can access this information to develop data-driven tools to serve customers, fostering innovation and competition. Historically, financial institutions have not allowed customers to own and share their data. SDF supports initiatives like open banking that leverage open data to empower consumers to own and use their data to access a wider range of services.

SDF’s letter offers key considerations when developing a national strategy for financial inclusion and suggests deploying an open system philosophy. We appreciate the opportunity to respond to Treasury’s RFI and remain committed to working with policymakers on this issue.

Explore how we think about the role of open systems and blockchain technology in financial access and inclusion, and read the Treasury response here.