Why are Black Americans investing in cryptocurrencies?

Facing continued discrimination, Black entrepreneurs look to crypto for economic equality

Black and white photograph of NYC                                 
Black Americans keep much more of their savings in cash than white Americans do – Photo: Shutterstock


From Hill Harper, founder of The Black Wall Street, the first Black blockchain wallet, to Tavonia Evans, founder of Guap Coin, advocates are using crypto to empower and educate Black Americans about the importance of money and the value of good investments. 

Prosperity for the Black American community, crypto enthusiasts suggest, will not be a result of knocking on the doors of a system that, despite virtue signalling galore, appears to have done little to address stark racial inequalities.

Instead, in order to break through these relations that continue to shackle countries and communities in a dance of post-colonial dependency, dramatically new ways of engaging and thinking about money are required, which do not depend on existing structures, campaigners say.

Lee cites the community of Greenwood as being defining in terms of what Black people can achieve when Black communities reclaim the dollar. 

Black Wall Street

OW Gurley, a wealthy African-American landowner with a vision to build a town by Black people for Black people, bought 40 acres of land in Tulsa, Oklahoma, in 1907 and began inviting Black people to set up businesses, even providing loans to help individuals become autonomous.

With luxury shops, hotels, restaurants and publishing houses, the town became affluent and self-contained, based on the idea that Black wealth could grow if funds were pooled.

According to Michelle Place, executive director of the Tulsa Historical Society and Museum, “within Greenwood, every dollar would change hands 19 times before it left the community”.

By the end of the 1910s, Greenwood’s prosperity drew unwanted attention. With the re-emergence of the racist Ku Klux Klan, racial tensions were fuelled.

In 1921, after the alleged rape of a young white woman by a Black man, white men mobbed the town, killing hundred of Black residents and destroying thousands of properties. 

What does this all have to do with crypto? First, let’s take a look at existing inequality. 

Economic inequality

A hundred years after the Tulsa massacre, while social justice has no doubt taken off, its impact is arguable if it is not underpinned by economic equality.

Economics undeniably dictate power relations. If a group of people has inequitable access to financial empowerment or asset ownership, they are left subject to continued exploitation.  A 2019 report by the Center for American progress said:

“The legacies of slavery, Jim Crow, and the New Deal — as well as the limited funding and scope of anti-discrimination agencies — are some of the biggest contributors to inequality in America.Together, these policy decisions concentrated workers of color in chronically undervalued occupations, institutionalized racial disparities in wages and benefits, and perpetuated employment discrimination. As a result, stark and persistent racial disparities exist in jobs, wages, benefits, and almost every other measure of economic well-being.”

US statistics 

Black Americans, who make upalmost 13% of the US population, hold a mere 3.8% of the $116trn in wealth in the US, according to Federal Reserve data. 

Data from the 2019 Survey of Consumer Finances found that the typical white family has eight times the wealth of the typical Black family. While the mean family wealth for a white family stands at $983,400, for a Black family it is $142,500.

While the Black community has been dogged by generations of discriminatory policies, white people have passed on generational assets, largely tax-free. According to Brookings data, 30% of white people received an inheritance, against  just 10% of Black people. The legacy of inequality therefore very much impacts the economic inequality of today. 

Even in non-liquid assets, there remain vast inequalities. Only 17% of young Black families owned a home, against 46% of young white families. Furthermore, Black households on average have drastically less savings or means of borrowing from friends or families. 

Venture capital investments

In terms of venture capital (VC) investing, the statistics are equally staggering. In the US, only 3% of overall deal volume in 2020 went to Black-founded companies. In the preceding six years, that percentage has never exceeded 5%, according to US Census data. 

Carrie Eldridge, founder of ATO Gallery, an art gallery that leverages blockchain for transparency, told Cointelegraph: “As a Black woman, I feel that I don’t have the same access to funding. The challenges I have faced boil down to the same that all Black entrepreneurs in technology face. It’s an alarming fact that through 2021, only 1% of VC funding went to Black people, with 0.2% going to Black women.”

Jon Gosier, a Black entrepreneur, said: “One of the challenges for Black entrepreneurs is that you have a good idea, you’re ahead of the curve, and you have the skills to execute it, but because they haven’t seen a Black person do it, they wait for another person to do it.”

Without access to capital to grow businesses, how can young Black founders build wealth and develop a greater sense of autonomy within the system? 

Predatory loans 

While loans to build businesses and help blacks develop wealth appear to be scarce, predatory lenders, including payday loans companies in the US, have been found to target minority communities. 

Payday loans are unsecured loans offering small sums of money with staggeringly high interest rates. For example, for every $100 you borrow, you are charged a fee of between $10 and $30.

These payday loans, research has found, are disproportionately targeted towards minority communities and individuals without bank accounts in the US, thus keeping them in a cycle of debt. For example, while Black people constitute only 13% of the total American population, they make up 23% of all holders of storefront payday loans.

The likelihood of a family taking out a payday loan increases if they are unbanked. Black people, as recorded in the statistics, are less likely on average to have substantial savings. Additionally, they are more likely to have been hit harder financially by the Covid-19 pandemic. The chance of them becoming the victim of payday loans becomes much more likely. 

Investing in assets

As Harper said eloquently during an interview: “Black people know how to work for money but not make money work for them.”

John W Rogers, Jr, founder and co-CEO of Ariel Investments, said: “We didn’t have a grandfather or aunt or uncle or mom and dad educating us on the markets because they didn’t benefit from it because of historical discrimination in this country.”  

Having access to wealth grows wealth. Having access to capital to build businesses and invest in assets grows wealth. Having access to information around what constitutes good investments and what constitutes bad investments grows wealth. Having faith in the system allows investors to make wise long-term investments as opposed to ‘safe’ but ultimately low-yielding ones. 

Among Black Americans who have enough disposable income to make savings, money is more likely to be kept in bonds, real estate or savings accounts. Given the devaluation of the US dollar, cash does not generate income, but instead it declines in value. Bonds in turn have returned very low yields as interest rates have plunged to negative. 

Michelle Singletary, a journalist for the Washington Post, has also spoken about the profound effect distrust among Black Americans has on their investment choices. 

“Those who like to pigeonhole Blacks as financial illiterates argue that the disparity results from the failure of Blacks to comprehend the importance of investing. This viewpoint ignores the history of slavery and its enduring impact on the descendants of enslaved people.

“Given that plantation owners used slaves as collateral for loans, it is not surprising such distrust exists,” Singletary says.

While young Black investors are bucking the trend and utilising apps such as RobinHood, there is still a long way to go to catch up. 

What does this have to do with crypto?

If reliance on an established system does not create the foundations by which minorities can become economically equal, then logically finding alternative means outside of the system becomes necessary.     

Enter crypto…

Crypto as an alternative

Crypto as a peer-to-peer network is not mediated by central banks. It exists independently of authorities and, due to the anonymous nature of transactions, is not stacked against individuals due to their race or ethnicity. 

The low barriers to entry mean that anyone with access to the internet can become a crypto investor. Given the fact that while Black and Latin people constitute just 32% of the US population, they represent 64% of the country’s unbanked and 47% of its underbanked households, it is easy to see why cryptocurrency investing has the potential to take off. 

According to research, the number of Black Americans who invest in cryptocurrencies is approaching twice the number of whites. A recent Harris Poll survey found that in the US 30% of Black investors invest in cryptocurrency compared with just 17% of white investors. Awareness of crypto also appears to be higher, with 50% of Black Americans saying they are aware of it compared to just 37% of White Americans. 

Tyrone Ross, CEO of Onramp Invest, said: “Crypto is very big with Black millennials and LGBTQ [lesbian, gay, bisexual, transgender and queer] Americans because it represents freedom... This is very much a social movement.” 

Furthermore, because crypto is still at its nascent stage, everyone, regardless of colour or creed, is new to the arena and learning about it at the same pace. As a result, there is a wealth of basic information on the internet to help individuals become informed. 

Importantly, crypto coins such as Bitcoin, with its open source code, means anyone can see how the movement of money works. Given the tremendous impact blockchain technology could have on the disruption of the financial system, Black Americans understanding and contributing to the building of the technology will in turn give them more leverage and opportunities within it.  

Websites like Blacks in Bitcoin, founded by Edwardo Jackson; Black People & Cryptocurrency, co-founded by Deidra Ramsey McIntyre; and National Policy Network of Women of Color in Blockchain, founded by Cleve Mesidor, have all been developed to help raise awareness about crypto.

The sites also help raise the profile of prominent Black people in the crypto space, thus empowering more Black Americans to engage through investing and through inspiring Black Americans to develop businesses of their own in the space. 

Hill Harper’s app Black Wall Street is also deeply informative, as his aim is to educate black Americans about crypto before they invest in anything.

In an interview with Bloomberg, Harper argued that unlike apps like RobinHood, which encourages trading, his app is designed to encourage Black Americans to hold stock in ascending value assets over the long-term. Through large swathes of Black retail investors putting and keeping money in crypto such as Bitcoin, Harper argues, volatility would logically level out.

Crypto for the community

Isaiah Jackson, author of Bitcoin & Black America, talking about his reasons for writing the book, said: “Years of exclusion and discrimination in the current financial system have affected the Black community, so I wanted to share information about a new financial system that was built for everyone.

“You can burn down Black Wall Street, but you can’t burn down Bitcoin. Black people have an opportunity to help build a new digital monetary system that can help change our outlook for generations.”

Jackson, in his book, discussed how Black communities can financially thrive when no longer controlled by the dollar, and how the emergence of a currency that works in the favour of Black communities rather than against them can lead to prosperity. 

Guap Coin founder Tavonia Evans developed the coin to encourage Black Americans to invest in Black communities. 

The relative lack of economic prosperity among African Americans can be in part due to the fact that the Black dollar fails to stay in the community, essentially meaning it is limited in its ability to build Black prosperity, leaving Black businesses and communities more dependent and less self-deterministic.

Guap Coin encourages Black Americans to put back into their community by rewarding them for investing back into Black businesses and institutions. 

Similarly, property investor Vernon J founded Equity Coin to empower the community and democratise real estate investing. Through the use of blockchain technology, minimum investment size can be reduced, opening up investments that were previously inaccessible. 

Risks of crypto investments

Crypto as a vision or a movement is undoubtedly compelling and  the emergence of new innovations such as Guap coins are exciting and have the potential to create real difference. 

If Guap coins were held as a means of exchange by Black Americans, with every Black merchant accepting payment in it, not only would the customer be rewarded for investing into the community, Black businesses would thrive with the dollar remaining in the community. 

While such possiblities are exciting, there remain extensive obstacles to such visions being realised. These include the introduction of potentially unfavourable regulation, which would hit founders and customers, potentially destroying the business proposition entirely.

Many crypto enthusiasts, including Harper, have encouraged investment in Bitcoin. However, while Bitcoin has rocketed to staggering prices, bringing some investors a lot of wealth, it remains an incredibly risky proposition.

With Bitcoin teetering at astronomical prices of above $40,000, the possibility of the price crashing down, as it has before, is not unlikely. With such high risks individuals keen to become crypto traders must get to grips with potential downsides and not invest more than they can afford to lose. 

While the rise of ‘smart money’ pouring in from institutional clients, could edge crypto further into the mainstream and the prices could keep picking up, it remains far from a safe bet.

While crypto and blockchain have the potential to help bridge the equality gap, ill-considered investments into already overpriced coins could, if any crashes occur, worsen the divide.

Final thoughts 

Black voices finding new ways to reclaim self sovereignty and build wealth that does not depend on knocking on the door of a system that has largely failed to let them enter, is nothing but positive. If crypto is the platform that enables such conversations and creates new possilibilities, then this is of great value. 

Of course, renewed efforts should be placed on dismantling parts of the existing system which continue to discriminate against Black Americans, however, with such rampant inequality it makes sense for Black Americans to stop waiting for it and start taking it. 

Further reading

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