By PRINCE JINDAL and JUNG WON KIM //
Access to capital remains an enormous barrier to starting a business.
Too often, entrepreneurs are turned away by a financial system based on credit scores and rigid collateral requirements that reinforce systemic inequities. For underbanked communities in particular – immigrants, minorities and women – the hurdles to securing a traditional loan can be insurmountable.
But emerging technologies are changing the game. With the right regulatory environment, digital assets and blockchain may just hold the key to a more equitable future.
Digital platforms are fueling a boom in minority- and women-owned businesses. But even as the Internet makes it easier to start your own business, lack of access to affordable capital continues to hold many minority business owners back from scaling their operations, hiring more workers or weathering an unforeseeable crisis like the COVID-19 pandemic. According to the Federal Reserve, in 2020, Black-owned businesses were the least likely to receive all the financing they sought.
Prince Jindal
Lending backed by digital assets is emerging as a solution. By allowing digital assets to be used as collateral, these loans give small-business owners an opportunity to unlock liquidity without selling their crypto or facing the delays and denials that too often define conventional lending.
For entrepreneurs with poor or thin credit histories, this crypto-backed model can provide the capital necessary to hire more people or open another storefront.
Consider the restaurant owner who holds a modest amount of Bitcoin purchased years ago. Or the immigrant entrepreneur who has built a small stake in Ethereum while supporting family abroad by sending remittances back home. These individuals may never meet all the requirements of traditional lending, but with loans backed by their digital assets they can access the capital they need quickly, transparently and responsibly.
Responsible lenders like Lantern Finance are already focused on making these loans safe and accessible. But today’s fragmented regulatory environment creates uncertainty for businesses and consumers alike. As crypto platforms, traditional banks and insurers explore partnerships, too many questions remain unanswered.
Jung Won Kim
Legislation that provides legal clarity and establishes clear rules for the structure and function of digital asset markets would address these challenges directly.
With the right policy foundation, crypto-backed loans can open the door to entrepreneurship for communities historically left behind. Such a framework would empower responsible developers to innovate while ensuring robust consumer protections. Demand for digital asset financial products is growing, but regulatory uncertainty is holding back progress.
As Congress considers legislation aimed at clarifying the rules of the road for digital assets, they should keep in mind the small-business owners who deserve the same chance as anyone on Wall Street. Getting these policies right will help build a financial system that rewards effort and vision, rather than punishing people for weak credit scores or lack of inherited wealth.
Prince Jindal and Jung Won Kim are the founders of Lantern Finance, a financial services technology company that offers crypto-backed loans.
