More Americans are jumping in on the cryptocurrency train, including Black Americans and other people of color, according to a recent report from The Washington Post.
Cryptocurrencies, commonly referred to as crypto, is offering opportunities for minorities usually disadvantaged through traditional financial systems. Struggles in the traditional finance landscape include bias from banks, venture capitalists, and other institutions that make it difficult for Black people to acquire or build wealth.
For those not acquainted with what crypto is, here’s how reporters described it:
“Cryptocurrencies operate on blockchain technology, a decentralized network spread over many computers. The value of the currency is based on supply and collective demand, and not backed by the federal government or items of value — with the exception of stablecoins. Thousands of digital currencies have sprouted up since bitcoin — perhaps the most well-known cryptocurrency — was created in 2009.”
While the community started off as a hobby for “tech-savvy, financial wizards” who had plenty of money to use, more Americans are participating in the trillion-dollar industry. A recent survey by NORC at the University of Chicago says 13 percent of Americans reported buying or trading cryptocurrencies in the past 12 months, and 44% of those individuals were non-white.
The Post even shared the story of a pair of twins who used their crypto investments to help their parents. They helped pay off one of their mortgages after cashing out some of their bitcoin, raking in around $100,000.
“When you have been locked out of the system, when you haven’t had pathways to create generational wealth, you see this as an opportunity,” Cleve Mesidor told the Post, founder of the National Policy Network of Women of Color in Blockchain. “You’re going to tell your community about it and you’re going to find ways to optimally use it to ensure you cannot just build wealth for your community, but build wealth for the next generation.”
While this sounds appealing, there have been some extreme risks and dangers surrounding cryptocurrency. Kenneth Rogoff, a Harvard University economics professor, called crypto trading “much riskier than speculating in stocks… And it’s still the Wild West in terms of regulation.”
That may be changing after some new provisions were included in the recently passed $1.2 trillion infrastructure bill. Reporters say people crypto investors are now required to report their gains to the IRS, but there are some exemptions.
Darrick Hamilton, another economics professor at the New School, also warns that Americans who already have the most to lose are risking more by throwing themselves at this volatile market.
“It is true the traditional financial system has not provided access, and frankly exploited Black people,” Hamilton explains. “But the remedy isn’t to turn to another vulnerable system, however well-intended it may or may not be. The remedy is a public sector that ensures they have access in an equitable way.”
Read more about Black people’s involvement in the trend here.