Emerging Lending Protocols Aim to Bridge Gap for America’s Underbanked - Crypto Economy

• Paradigm’s report links crypto use to distrust in traditional banks.
• The underbanked find international transfers easier with digital assets.
• Crypto lending faces hurdles with overcollateralized loan requirements.

Venture capital firm Paradigm published a new report titled “Bridging the Gap” The study explores how Americans with limited banking access use cryptocurrency. Researchers conducted interviews with 11 crypto users for this analysis. Ten of the eleven participants stated they distrust traditional financial institutions, highlighting widespread skepticism toward conventional banks.

These users reported problems with conventional banks, including sudden account freezes and unreliable transaction processing. Several individuals described using crypto for international transfers

One participant mentioned using digital assets to quickly pay for emergency medical care for a family member abroad, illustrating the practical utility of crypto in urgent situations. The report defines the underbanked as banked individuals who regularly use alternative financial services, clarifying the scope of the study.

Lending Limitations Present Major Challenge

The report identifies a key obstacle for crypto serving as a full banking alternative. Traditional banks provide credit access for homes and businesses, while current crypto lending protocols mostly require overcollateralization. Borrowers must deposit digital assets worth more than their loan value, a system that excludes people without existing capital, emphasizing the structural limitations in crypto-based lending.


US Representative Ritchie Torres recently endorsed crypto’s potential for low-income communities. The Democrat spoke at a Ripple conference about reducing financial delays and fees, connecting policy advocacy with practical benefits of digital assets. The Paradigm report supports this general viewpoint, as the venture firm advocates for legislation that supports digital asset innovation, signaling the intersection of technology, finance, and public policy.