Crypto can help build a more inclusive financial system

IVO Jenik, senior financial sector specialist with the Consultative Group to Assist the Poor, said crypto and related technologies could help address weaknesses in the existing global financial system, particularly the exclusion of billions of people from adequate financial services.

He was speaking during a panel discussion on virtual asset service providers (VASPs) at the Central Bank of Trinidad and Tobago’s Research Review Seminar 2026, themed “Operating in a Fractured World: Economic Resilience, Innovation and Sustainability,” on September 10.

“The current financial system, both nationally and globally, is not really working very well for 1.3 billion adults globally who are excluded, and many, many more millions who are underserved,” he said. “And that includes people who either cannot or cannot, for a reasonable price, send money home or to other places that they want.”

Jenik said crypto and related technologies created an opportunity to build a more inclusive financial system, with stablecoins for remittances among the use cases showing the greatest promise.

“So, I think we have this unique opportunity to build new technological and regulatory standards for the financial system that is better and is more inclusive than what we have been having for years,” he said.

He said peer-to-peer crypto remittances still represented only a small share of overall remittance flows, but the technology’s back-end settlement capabilities had already been demonstrated.

“The promise, at least in terms of the back-end settlement, is there and has been proven,” Jenik said. “The challenge ahead of us, of course, is how we translate this improvement into real price reduction and more convenience for customers who still need to off-ramp their stablecoin holdings, for example.”

Trade finance was another potential application, he said, with tokenisation potentially improving access to financing for small and medium-sized enterprises that face significant funding gaps.

“The other opportunity that we see is in trade finance, for example, where tokenisation can be used to improve access to finance by small and medium enterprises that are many out there, and many of them face a huge financing gap,” he said.

Jenik said the way T&T structures its regulatory framework would be important if local fintech companies were to scale beyond the domestic market.

“One possible success is creating a regulatory framework that works for multiple markets and allows fintech startups to launch in one market, but very easily transition and scale in other markets,” he said.

He said harmonising regulatory standards was particularly important for small jurisdictions.

Jenik cautioned, however, against assuming that success would look the same across jurisdictions.

“Ultimately, what success looks like is dependent on each and every jurisdiction that decides to pursue innovation,” he said.

Regulators, he said, needed to establish clear definitions of what they wanted crypto innovation to achieve in their respective markets.

“Regulators who have been succeeding in leveraging innovation for achieving their regulatory objectives are those who have a very clear definition of what success looks like in their market,” Jenik said. “And that definition cannot be easily translated from one place to another, because it really varies, and it’s very contextual.”

He also argued that regulators needed to establish a clear risk appetite rather than attempting to eliminate all risk from innovation.

Some level of risk would inevitably remain even after safeguards were introduced, he said.

“Because things will go wrong because there is going to be some risk that materialises and that may be perfectly fine. In fact, it may be in line with what we have defined as our risk appetite,” Jenik said.

He added that experimentation should not be confined to the sandbox.

“If we want a better system, if we want more financial inclusion, we need experimentation even outside of the sandbox. And for that, knowing the risk appetite is quite essential,” he said.

Jenik also proposed the possibility of a global anti-money laundering and counter-terrorist financing (AML-CFT) sandbox.

“It would be very nice if we did have not only the national regulatory sandbox system but some sort of a global, maybe FATF-endorsed, AML-CFT sandbox that would encourage jurisdictions to be a little bit more open to experimentation with the necessary safeguards in place but also with the notion of understanding that there is such a thing as risk appetite,” he said.

He warned against treating regulatory sandboxes as incubators for crypto businesses where there was no genuine demand.

“Regulatory sandboxes sometimes have been misunderstood or misused as incubators of innovation,” Jenik said. “And I really believe that regulatory sandboxes are not meant to create new markets where there is not enough traction.”

Instead, he said, the value of a sandbox was in providing regulatory clarity where there was already genuine market interest.

Balancing innovation and risk

Kylene Dowden, director of legal services at the Financial Intelligence Unit, said crypto-based remittances and cross-border transfers were particularly relevant to T&T given the country’s foreign-exchange challenges.

But she said the movement of digital assets across borders also presented significant money laundering and terrorist financing risks.

“Remittances and that use of virtual assets in cross-border transfers is something that is gaining traction, is something very relevant to our economic landscape right now, given our forex challenges,” Dowden said. “But what comes with that as well is arguably one of the higher levels of risk, where there’s no transparency in the movement of those funds across borders.”

She said this was where the Financial Action Task Force (FATF) Travel Rule became important.

“The Travel Rule essentially just says that information pertaining to the originator and the beneficiaries of these funds travel with the transaction,” Dowden said.

She said the FATF was seeking to harmonise the movement of value between jurisdictions by applying similar principles to virtual assets and traditional financial transfers.

“The idea that FATF has is that it’s the same type of activity, so the same type of rules should follow,” she said. “You have a movement of value with traditional financial assets; this is now these new technologies.”

The challenge, Dowden said, was not necessarily establishing rules but ensuring they could be implemented effectively.

T&T’s sandbox provides regulators with an opportunity to assess how those requirements work in practice, she said.

“We are able now to actually see the practical implementation of these rules, because right now we do have AML rules, including aspects of the Travel Rule, that cover the VASP sector within the sandbox,” Dowden said.

She said the experience gained from the sandbox should inform the permanent regulatory framework.

“Before the entities graduate out of the sandbox, it would be useful to take our observations from that implementation and try to translate it into regulation that is more beneficial to the sector as a whole, as well as securing the safety of the funds and the safety from misuse by criminal actors,” Dowden said.

She said VASPs also had a responsibility to build AML-CFT safeguards into their operations from the outset.

Dowden said scams were already exploiting consumers’ limited understanding of crypto.

“There are many scams that we know are present in the landscape right now, especially with respect to the market’ of understanding about virtual assets on the whole,” she said. “So, we see perpetrators taking advantage of the vulnerable in society by telling them... ‘Give me your funds, and I can invest them in this for you, and you’ll get higher returns’.”

She said regulation could help consumers identify legitimate crypto businesses.

“The public sector now can gain confidence with knowing that if I’m registered with the TTSEC, if I check the website and I see the FIMS name appearing on the website, that this is a legitimate company that I can invest my funds in, that I can conduct a transaction through,” Dowden said.

Dowden said VASPs would also need to conduct institutional-level risk assessments because their exposure would depend on their individual business models.

“Individual VASPs would have different levels of risk based on the types of transactions they conduct, the types of virtual assets that they use, their customer base, the jurisdictions that they may be operating out of as well,” she said.

She said those systems should be capable of detecting suspicious transactions before incidents occurred.

“The idea is not for suspicious transaction reporting to be something that you only think about when an incident occurs, but rather that you put systems in place from the outset that can raise red flags for you and trigger that need for you to go back and analyse whether or not this transaction is in line with my customer risk profile,” Dowden said.