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Visiting Assistant Professor Nakita Cuttino ’12 testified remotely before the U.S. Senate Committee on Banking, Housing, and Urban Affairs on June 30 in a hearing titled “The Digitization of Money and Payments.”

Cuttino’s primary research interests are in the areas of banking regulations, consumer finance, and securities law, and she teaches a course at Duke Law on fintech and financial inclusion. Her work seeks to assess whether the emerging markets of fintech services, cryptocurrencies, and more generally the use of artificial intelligence in the financial sector reasonably fit within existing regulatory schemes or if such schemes should be reassessed to better serve the modernization of financial services and democratization of wealth in the United States.

Defining the key issue before the committee as financial inclusion with respect to the U.S. payments system, Cuttino said in her written testimony that improvements should prioritize solutions that remedy barriers to the payments system that harm low-income Americans. Many of them, she observed, waited weeks longer to receive paper stimulus checks issued under the federal CARES Act than consumers with direct deposit access to their bank accounts, and on receiving the stimulus payments incurred steep check-cashing fees. With low-income consumers long exploited in the marketplace by such service providers as payday lenders and check cashers, public policy solutions must truly democratize the payments system or “these frictions will continue to contribute to financial fragility,” she said.

Cuttino explained how the current system harms these consumers and how the payments system barriers — she categorizes these as “time and access frictions” — contribute to market risks even with emerging fintech services such as early wage access programs. She further argued that a public banking option with existing payments infrastructure, such as one through which the Federal Reserve Board makes available to all Americans zero-fee, pre-paid debit cards available issued in coordination with federal agencies that make payments to citizens, would most effectively serve the aims of financial inclusion in the immediate future.

Cuttino, ended her testimony with a caution regarding such emerging payments technology as blockchain-based central bank digital currency (CBDC) and stablecoins.

“Congress must critically review innovations like CBDCs and stablecoins to ensure novel forms do not belie true functions,” she said. “In terms of financial inclusion, this means ensuring that promises of open access are achievable and ultimately achieved. To serve that end, I propose the following inquiries. Is there evidence that this new solution will work to increase access? What are the use cases for rural and low-income communities? Are there financial or physical barriers to access? If services are ‘free’, what alternative tradeoffs are consumers making (e.g., consumer data)? Is consumer data being used to exploit behavioral weaknesses to their detriment? Additionally, are consumer conditions improved by a shift to the novel solution? Ultimately, fintech solutions should not merely move the most [vulnerable] Americans from the fringe financial marketplace to a fringe digital economy.”

Prior to joining the Duke Law faculty, Cuttino practiced as a corporate associate with Simpson Thacher & Bartlett LLP in the Houston and New York offices, specializing in complex debt finance transactions. She earlier served as a law clerk to Judge Eric L. Clay of the U.S. Court of Appeals for the Sixth Circuit.

The former chairman of the U.S. Commodity Futures Trading Commission, J. Christopher Giancarlo, and the CEO and co-founder of the digital asset company Paxos, Charles Cascarilla, also testified before the committee.