Financial Inclusion Gone Wrong: Securities and Crypto Assets Trading For Children
50 Pages Posted: 13 Jun 2021 Last revised: 2 Oct 2022
Date Written: June 8, 2021
According to studies, for most Americans, money is a major source of anxiety. Looking for ways to help Americans address this source of anxiety, some believe that increasing children’s financial orientation could help lower their money-related anxiety levels as adults. Identifying this market as a business opportunity, and reassured by research that shows that by age six, children are already veteran consumers of mobile apps, financial technology (FinTech), decentralized finance (DeFi) and even traditional financial entities have started offering services and products to children. These services and products include a broad array of financial-related products and services – from enabling children to earn money for doing their chores, to trade stocks and crypto assets, and even earn digital assets and currencies while playing video games.
The potential of this new market’s clientele is valuable for two reasons. First, having more customers is always a good thing. Second, children will eventually mature into adult customers and presumably will continue using the services and products they like and with which they are familiar. And although some legal challenges are associated with children, who are minors, not only entering into financial-based contracts but also doing so online, this business trend will continue to grow as offering financial services to children is becoming socially acceptable. Society’s newly adopted paradigms for describing, understanding, and shaping children’s rights, domestic relationships, custodial status, and even digital purchasing power are all supportive of this trend. Moreover, FinTech and DeFi financial apps and games can help teach children about the value of money, the importance of investing, and the risks involved in trading.
Yet, FinTech and DeFi apps and games could also have a developmentally and behaviorally disruptive effect on children, similarly to other consumed digital content. Moreover, they should be a source of concern to anyone focused on investor and consumer protection, including regulatory agencies such as the SEC and FINRA, which have already expressed concerns about gamification and digital engagement practices. Given “the financialization of everything,” using legal and ethical reasoning, and behavioral economics tools, this Article calls for the search for effective financial literacy education for children to be replaced by a search for policies more conducive to good consumer and investor protection outcomes, which should guide lawmakers in regulating FinTech and DeFi apps and games offered to children in light of: (i) the addictiveness of digital gaming; (ii) how gamifying finance makes it feel less serious; (iii) the connection between gamification and gambling; (iv) how children’s financial choices are more susceptible to the influence of outside parties than are those of adults; (v) the FinTech and DeFi apps and games’ failure to teach children the importance of concepts such as debt, credit, and financial commitments; and (vi) the unrealistic burden on young parents who already struggle with the need to constantly supervise their children’s online activities, in our digital era, by expecting them to monitor their children’s online financial activities.
Keywords: children, education, financial inclusion, fintech, DeFi, crypto, NFTs, banking, finance, money, technology, regulation, consumer protection, FINRA, CFPB, trading, investing
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