WHAT'S UP WITH CRYPTO'S APPEAL TO BLACK FOLK?

As highlighted in my first post in this series, Black consumers and investors—thanks in large part to the “outreach” work of the Black Crypto Ecosystem (BCE)— got some serious skin in the cryptocurrency game. At least that’s true for many Black consumers and investors, and especially those under the age of 40. Once recent survey, for instance, finds that 25% of Black Americans currently own cryptocurrency, with that number leaping to almost 40% for those under 40. That same survey, in contrast, reports that only 15% of White Americans own some form of crypto, although the number does increase to almost 30% for those under 40 years of age. In any case, the data unambiguously points toward the intersection of color and crypto: All things considered, Black are more likely than White Americans to invest some of their funds into crypto.

All of this takes place against a background of some well-known economists warning about what they see as the danger of crypto. As early as 2013—just five years after Satoshi Nakamoto’s white paper— Nobel-prize winning economist Paul Krugman—was calling bitcoin “evil” because of the way in which much of crypto logic was philosophically grounded in libertarian and right wing economic thought (more on this in a subsequent post. Hang in there!). More recently, Krugman has likened crypto, and bitcoin partisans in particular, to a “cult” that’s probably going to be around “indefinitely.” And, lest we forget, another well-known economist— Nouriel Roubini of New York University—slammed crypto as the “mother or father of all scams or bubbles.”

Still, I’ve got a question:

What’s up with the popularity of crypto amongst Black folk?

BLACK FAITH AND HOPE IN CRYPTO: THE PROSPECT OF AN INCLUSIVE FINANCIAL SYSTEM

First off, from reading the work of actors in the Black Crypto Ecosystem (BCE)—and spending some time talking to folk— it’s clear that one of the reasons contributing to crypto’s popularity amongst Black folk is that it— the world of cryptocurrency and the Blockchain— projects an alternative vision wherein finance is both democratic and decentralized. In short, part of the appeal of the crypto world is that it projects itself as a financial system that’s genuinely accessible to all and, therefore, as a viable path whereby ordinary Black folk (and others) can bypass a traditional banking and finance system that rides roughshod over the nation’s most economically vulnerable citizens. The promise projected by crypto is one wherein all citizens, including those who have been rejected by the traditional banking and financial system, are empowered to take control over their economic destiny, to reclaim the dignity and agency that the extant system has stripped them of.

Here’s a couple of examples that’ll, hopefully, flesh this out a bit. If you’ve got jacked up credit—or you know someone who does— then you know it’d be virtually impossible to access and participate in the banking system via the establishment of a checking account. In all likelihood, if your credit is jacked, you’re pretty much toast when it comes to establishing a checking account; it might be possible, but it’s going to be hard. Someone in that position could easily find themselves at the mercy of the fringe and brutally predatory sub-finance system populated by neon signs flashing the presence of check cashing joints, pawn shops, pay day loans, and crappy looking buildings housing some title loan operation.

In contrast, FICO is not a door you have to pass through to enter and participate in the world of cryptocurrency. The world of crypto is painted as truly inclusive and fully capable of enabling participation by the “unbanked.” “underbanked,” and “credit score marred.”

And more broadly—and this is the second example— the popularity of crypto amongst Black people in particular and economically distressed people in general can be best understood against the backdrop of a reigning banking and finance system that resulted in growing income disparities, stagnant wages, macroeconomic instability, suffocating student loan debt, and—as in the case of the housing collapse and recession of 2008-2009— a destruction of Black wealth.

To the extent that crypto promises something other than this, something better and more inclusive than this, it’s hardly surprising that it has reached a level of popularity and excitement that exceeds that exists within more economically prosperous and stable communities.

BLACK FAITH AND HOPE IN CRYPTO: THE PROMISE OF BRIDGING THE RACIAL WEALTH DIVIDE

But perhaps the most powerful reason accounting for the relatively high degree of openness to crypto amongst Blacks is this: The existence and persistence of a deep racial wealth gap. The reality of this wealth chasm is undeniable. According to most recent Survey of Consumer Finances (SCF), the average or mean wealth held by White and Black Families are $983, 400 and $142,000, respectively. The average Black family, then, holds 15 cents for every dollar of wealth held by the average White families.

As a result, the average Black family is less able to transfer wealth in the form of bequests or inter vivo transfers like sliding your kid substantial monies in the form of wedding gifts, throwing in big on that tuition bill for children, and provision of a down payment for the purchase of a home.

“For these reasons,” write the lead authors of the SCF study, “wealth (or a lack thereof) can persist across generations and reflect, among other factors, a legacy of discrimination or unequal treatment in housing, education, and labor markets.”

Take the time to peek at the word and works of leading figures in the Black Crypto Ecosystem and you’ll be hard to press to find a single sustained discussion about color and crypto that does not prominently mention the paucity of Black wealth and the need to build up nest eggs that can be passed onto progeny.

Case in point: The group Black Bitcoin Billionaires host a room on the social media platform Clubhouse, and in their promo they emphasize upfront what they see as the power of crypto to aid in the building up of Black generational wealth:

“Generational wealth is the goal. Self-sovereignty is the mission.”

Now, remember that finding from the Ariel-Schwab 2022 Black Investor Survey discussed in the first post in the Color of Crypto series? You know, the finding that Black households are more likely than Whites to believe that crypto will generate an annualized rate of 20% or more (27% of surveyed Blacks believe this, as opposed to12% of Whites). This coincides perfectly with the hypothesis that Black investors, especially those under 40, see crypto as perhaps the quickest route to a closing of the racial wealth divide.

TAKING STOCK OF WHAT WE GOT

So, here’s what we got:

The Black wealth gap, which partially owes its existence to class and racial biases existent within the reigning banking and financial system, is a primary force behind the relative popularity of crypto amongst certain segments of Black folk. (The racial wealth gap is also reflective of the ways in which slavery, Jim Crow, racial violence, and regressive public policies have combined to impede the creation, accumulation, and protection of Black wealth).

Crypto gets a hearing because the Black Crypto Ecosystem, along with others, have made considerable headway in marketing it—the world of cryptocurrency— as a viable and more liberatory alternative to the dominant banking and finance system. It get a hearing because, among other things, it project a vision of finance that’s inclusive—genuinely open to all— relatively easy to get into, and fundamentally democratic and decentralized.

Look, I’m a skeptic of crypto, and if you keep following this series, it’ll become increasingly clear as to why.

But it does us all good, even critics like me, to understand the undeniable popularity of crypto amongst our kinfolk as a protest vote against the myriad ways in which the financial system hinders, rather than helps, attempts to attain economic security.

That’s what’s up with the appeal of crypto to Black folk.