How Can Cryptocurrency Build Black Wealth?
Welcome back. We're sitting here with Tanya Evans a professor at the Penn State Dickinson Law School. Eric on a boat they took Hutto of course a managing partner and co-founder of Audacity and Kayla Gardner a Bloomberg News reporter. Thanks all of you for being here today. We're trying to have a little broad discussion here about not only the wealth gap in particular but more importantly some of the risk some of the opportunities some of the initiatives that a new generation of people are taking out there to try to address some of those issues. And maybe a Kayla you can start off. You've actually been reporting on some
of these issues on the percentage of people who are invested in stocks. Some of the percentage of people who are invested in crypto assets. And you've seen some pretty interesting disparities between the black community and the white community. Tell us what you know. Definitely so I think it's well known that black Americans hold less wealth than they probably should in this country. Bloomberg data suggests that that number is about 4 percent of all wealth
that's available which is trillions of dollars in the US is goes to black Americans. And that's compared to a population of 13 percent in the US. So obviously a huge disparity there. I mean in my reporting I found that black Americans are actually more likely to hold crypto currencies than white Americans. So among investors 30 percent of black Americans people who already hold some kind of investment have crypto currencies. And that's compared with about 17 percent of white investors. So there is kind of this consensus that black Americans are more willing to kind of take the chance or the risk if you will in crypto currencies. But there is a huge conversation that's happening online and on social media platforms amongst black Americans who are exchanging information that they've learned whether through education or themselves or social media and kind of making an effort to share that with others. What about the generational differences. Eric on specifically she says that she's seen more
people I guess investing in this. But is this mainly the younger generation or the older folks also getting involved in this as well. So most certainly the younger population is certainly gravitating to it. I would say the most and I think that comes from of course Covid sort of being the eye opening moment for a lot of people around the world but specifically communities of color across the U.S. recognizing that you know but the bottom fell out and in the nation and everyone realized you kind of have to fend for yourself. And so given that the United States is going to being majority young and people of color in just a few years that is the fastest growing demographic to adopt cryptocurrency. I would say though that to give more color on this gap and percentage differences between racial groups is
that the crypto audience that is really driving the market in the United States today is young white male probably under 40. Would that have significantly high disposable incomes where the wealth transfer is already sort of well so circulating and incubated within their family infrastructure. And I would say that the younger population of people that are people of color especially black youth that are participating in crypto simply don't have the same volume. So you might find people who are
excited about cryptocurrency but maybe Max maybe put to work a thousand or ten thousand dollars versus others that are putting millions. Yeah well Eric on it. Can you expand on that just a little bit because you've inserted yourself into this world. You've started your own fund here. What's the response been so far. Yeah so the response has been resounding from from black investors who want to participate as limited partners. In addition all the way up to institutions likes you know your large banks of the world that are interested in participating. I think what's most important is that people seek beyond lip service and the diversity performance of this opportunity and really know that this is beyond this is beyond the racial dynamic. This is recognizing where the future of innovation
that's going to change the planet will come from. And that's undeniably undeniably coming from communities of color that have essentially have inventions to change the world in their best interest. I'm Tanya. You've been beating this drum for a while as well. You've been involved of course with maker Dow and some of their growth initiatives. Maybe you can tell us a little bit just about what you've seen with regards to the responsiveness of people in the black community to embrace this. I'm really excited about the response. It's been in some sense it's been a mixed bag because in the black and brown community so many times people have been misled misinformed. I can think in my grandmother's generation going to sleep one
day and the savings and loans on the corner the next day is no longer open and people are losing so much. So there's a real mind shift. It's also related to trust and re imagining what trust looks like in a decentralized world. But that presents a lot of really really important opportunities particularly for those communities like black and brown communities that have traditionally been locked out of tech and finance. And we see the intersection of the two and the crypto asset and block chain space. And so people are starting to lean in to see the reality or at least the possibilities of what can be. When one invests
in crypto assets and certainly in the deep space. Well Tanya I mean let's talk a little bit more about these five. There seems to be a certain degree which of I guess freedom associated with that world to a certain degree of access. Can you just kind of define for our audience kind of what define decentralized finance actually means to you. The essential fight against the different than just purchasing Bitcoin or 3M or any of the other coins decentralized finance is reimagining what it looks like to participate in savings and loans. So you know the banking system effectively is encouraging folks to save. And those savings are then used by banking institutions to to to give loans on the other side of that. In the decentralized world it's removing banking institutions and really leveraging
peer to peer technology and automated protocols to directly connect both sides of that transaction in a way that has the potential to earn more interest and also to participate meaningfully in a loan environment that is so often fraught with systemic issues that again keep people from participating meaningfully in the banking system and also in eventually owning property as well. Barak can you expand on that and particularly on how people can be invested in this other than just say buying a crypto coin. Yeah. So there's a lot to say about the myriad of ways folks can get involved. Right now what we're seeing is culture and things like art and sports really leading the way and what is adopting a lot of young people a lot of communities of color a lot of just general diversity. And that's a really exciting aspect of this world. Some people would argue that if TI's non fungible tokens are a
form of de fi in the sense that there is an asset that in some cases would typically be physical but is now represented digitally that represent shows your ownership of that thing and where certain assets call it crypto punts for example can cost perhaps hundreds of hundreds of thousands of dollars if not millions. People can actually own a piece of that one asset through something called factionalized ownership. So really what we're seeing right now are things like NAFTA and of course more traditional finance that is more crypto enabled that is called coherent like a very undeniably defy. We're seeing the ability for people to own small parts or large parts of assets that are increasingly becoming more valuable across this new Internet. And ultimately what's the most important thing for people especially black communities is to be a founder or be an investor. Anything else is you doing some form of consumption which we know has never really acted in our interest despite our one point three trillion dollar purchasing power. So my encouragement for all audiences here is to get in your coding
bag get in your community community building spirit. And it's this is now is the opportunity to mobilize your community your friends and create an economy around. So it now is the time to say you know I really wish this thing existed in the world. How could crypto our block chain enable that. And I'm going to go raise funds approach audacity to get an initial check to build up the stream because this is the time for black people to be builders. They're an investor or a founder. Kayla you talked to a lot of young people who seem to also have that same mindset. What are
they telling you. Definitely in some of the points that both Tonya and AirCon brought up were definitely the resounding response that I got from a lot of the people I spoke to. Which is the aspects of crypto that are decentralized and really without mediators are very attractive to people because they've come not to trust the traditional financial system and they see this as a form of freedom or liberation. And also talking about and TS I think a
lot of black Americans are aware that they contribute a lot to music and culture and different things that become very popular in the mainstream. And this is a way to kind of profit off of that and get credit for whether it's crypto dances or a song that goes viral without losing ownership when it continues to get shared and replicated online. And we've seen this of course a lot with the people who are effectively creating this whether it's within FTSE. Of course the success that we've seen with top
shot and a lot of athletes and entertainers sort of reclaiming their image to a certain degree here. Does that I guess make the investor at the other side of the equation more interested in this. Is it encouraging. I'll jump in here and say I think investors should really think to themselves what is this investment today and what will it be in a year five or 10 years. If you have conviction that it'll be 3 X or 10x your investment that it's worthwhile to participate. But ultimately I think that black people given those those those assets that you just mentioned should think about themselves as launching an FTSE creating it. TS Such that people are buying into their creativity their culture making their influence and
others on the other side are having to decide on the long term value of that person. But we know that black communities have been the market makers for literally 400 plus years and we've contributed to every global supply chain that the world stands on particularly technology. So it's our it's our time to really token ISE our creativity and our culture and put it out into the market for others to participate in our shared ownership. But recognizing
ultimately that we have to bet on ourselves and our value. Let's talk a little bit about some of the technology underpinning this Tonya Europe. You were involved with course with maker Dow decentralized organization. It's more than just investing. I mean there is a way to land. There's a certain accountability that participants have amongst themselves on these platforms. Can you kind of explain the underpinnings of that how that works. First even just at a high level to talk about what the benefits are in the environment. You're coming down to two essential qualities that are absent in many respects and traditional. And it's. And that's access and transparency and so access. We've
spoken about a bit but being able to participate regardless of your gender your ethnicity your race to participate meaningfully in the system but also the transparency of distributed ledger technology. Meaning it's very jargon. But breaking down to the essence of what is the state of transactions and balances at any given time. And how do you verify the accuracy of that at any moment in time and the absence of centralized power around who gets to decide what hits the ledger and what does not. In this decentralized way where it's a network of computers instead of one database that manages that information. And so that aspect block chain technology is very very important. And we see it play itself out with a range of crypto assets not just those that functioning as currencies fungible currencies that are interchangeable but as Eragon said about non-functional tokens tokens those that are unique. And a final point is the way that all crypto assets currently in the United States are taxed.
They're taxed as property which means you enjoy the upside of capital gains. You also absorb losses. But that functions differently than currencies. And so it's the added benefit of participating in digital ownership in this new Internet. That also was very difficult to do in a Web 2.0 world where things were easily replicated and shared without exhausting the original. So there are a number of benefits from the technology that empower artists of color. And I'm glad that you also mentioned investors and collectors on the other side. There's empowerment on both sides to participate in finance and in our. How do we I mean there when you think about the traditional finance system the traditional banking system we've we know a lot about some of the structural issues that have effectively either blocked black people from participating or at least limited their ability to participate in full here. How do we make sure that defy crypto block chain. Everything associated
with this space here doesn't fall victim to some of the same issues that plague our traditional finance system. I can start with that. I think a lot of black creators are not waiting on institutional investors to get behind their projects. I think that's what's so interesting about this space is it's really community oriented. When you create a block chain project or you create a Dow which I'm sure Tanya can speak more about you really are building it with people you trust or you know. And so they're really using the power of community to create these projects. And they're not really waiting for institutional investors or big banks to get behind them. I think that's very accurate. This is the empowering component
of being able to participate on your own terms and in your own time and not being on the sidelines for someone to give you permission to participate. The permission lists environment of decentralized finance and Eric and I believe raise the issue as well. Yes. Being on the investor side and or the creative side. But on the other side the other aspect of that is participating in the build of this infrastructure. These the Layer 1 technology of block chain frameworks and things that are built on top of it. OK love mention the idea of decentralized autonomous organizations or dhows or decentralized applications. So I love the way Erik Ann mentioned earlier. Digging into your coding bag in order to empower yourselves on the technology the technological build of it as well because there is power and entrepreneurship coupled with this technology that will really start to eradicate the wealth gap that currently exists that's built on the backs of high income at the expense of appreciating assets. Want to shift the mindset from focusing just on income income as important or just on education clearly as a professor.
Education is important but meaningful ownership and participation will be in in creating and owning appreciating assets including businesses. Yes. I would definitely add on to that to say that 1 skill 2 skills 3 skills that I think are super important for all black people mobilizing into crypto right now is to become very technically literate as much as you can and use your own natural creativity as you consume and learn this tech technology to reinvent and create new things that are outside of the bounds that technology is seeing today because ultimately that's really where the astronomical wealth creation will be otherwise. Anything else you're getting a tail end or a piece of the final product that you think you're buying or owning but you're not owning the core foundation. And now it's still early to own the foundation and infrastructure of the Internet. And that's where most black people will literally catch up in terms of wealth
gaps. Second is to Tonya's expertise. We must become more legally savvy and we must be be very thoughtful about how we negotiate our community and partnerships and smart contracts and opportunities that secure our asset ownership into perpetuity. That part's really crucial that a lot of people overlook. And the third is we must become a community of devils. That means a
community that says if I'm going to buy five dollars of bitcoin I want to do everything I can to make it 10 to make it 20 to make it 40 to make it 80. We're only going to grow our wealth not by just having an income and holding assets but getting in the game of of growing our money. And there are various ways that are a lot more complex than we've got. What we discussed today that can help folks generate five times their money 10 times their money in some cases 100 times their money. Black people have to get into that game. Despite all of the centuries that we've been excluded from it because from building it to
writing the language in the contract to ensure is that we own it for centuries in the future. And from tripling it in 10 fixing it that's how we're going to literally transform our futures forever. I want to get your thoughts here on geographical differences as well AirCon. Specifically you when we talk about this we talk about it from the perspective of black Americans prior to the pandemic. I did a lot of traveling
through West Africa and the amount of discussion about fintech and alternative finance was enormous over there. And obviously there's been some changes since the pandemic. But I would think that the ability for not only ownership but for more progress released a faster rate of progress would be a little higher in some of the emerging market nations that maybe don't have traditional finance systems to the extent that we have them here in the United States. Yeah. Thank you so much for asking. This is another part that is wonderful about this moment in history is that another mecca for
black people and African people is the African continent. And right now what we're seeing is African countries and African markets are leapfrogging traditional finance infrastructure. So what took 400 years in the United States to build the banks that we know today. The pension infrastructure we know today the multitrillion dollar asset management firms that we know today
most African nations are completely skipping that process and going straight to mobile phones and wallets on these phones crypto wallets on these phones becoming the new banks. So where you have a significant population of people across Africa and other communities where black people exists like Brazil and other parts of the world that are largely unbanked meaning they don't have and don't participate in traditional finance with a banking account. Now their wallet and their cell phone their cell phone their wallet on their cell phone becomes their bank where there's no need to actually become banks because you are now bank lists on your phone. And that's an incredible opportunity. So that market woman a business owner and a young student can now figure out ways to not only buy assets that accrue in value generate yield that they 5 X and 10 X but now have direct access to the infrastructure and technology that they want to build for their market which they can then create as a fundamental infrastructure for technology across the entire continent of which all businesses globally will have to rely on.
So now the average person across any African market becomes their own bank their own technologists and their own builder and inventor of the future of the infrastructure that will literally transform the entire continent. It's a powerful time. Anyone else want to weigh in on that. I'm so glad that you brought up the issue of looking at it through an international lens. I think the privileged conversations in the crypto space focusing so much on the United States shows a bit of the bias just that that exists currently in traditional finance and other sectors. And to talk about this from the perspective of the full diasporic experience of black people throughout the world is really really important. And we
may find it is my great hope that we will find that this is an additional layer of connectivity that we need to bring disparate communities back together to a global community in ways that we were not able to do in previous iterations of the Internet. Tanya I also want to get your thoughts specifically on the regulatory environment. We've been talking a lot lately about particularly here in the US and even in the European Union. There's been a lot more discussion if you will about putting up more guardrails in the crypto space specifically but really in the broader defined space as well. The idea that central banks may even
decide to interject themselves in this as well particularly when it comes to stable coins and what some people see as a potential competitor to some of our reserve currencies out there. Is that regulatory push. Is that a threat at all for investors. It's interesting because in the late 90s when technologies like peer to peer technologies Napster Grokster BitTorrent BitTorrent which persists today a lot of these same discussions were going on about how to regulate in a decentralized environment. We see the same thing now. I think regulators have been cautious to enter too soon. There's a lot of discussion around it. But I actually think that in most cases regulators have paused to not thwart innovation but they always going to have to step in when investors and consumers are harmed. And so we're seeing a lot more activity around that space in the same way that we saw the earlier builds around the technology for Web 2.0 for example. You're seeing more
activity from Treasury for under reporting and non reporting of crypto gains particularly as we have a major infrastructure bill that that's going forward and finding ways to actually fund it. So that's interesting. And we see regulatory movement both at the federal and the state level here in the Commonwealth of Pennsylvania. We actually have a student representative that's working on creating a regulatory sandbox to waive certain things that are thwarting the activities of innovation in this space.
So we see it on both sides some aspects of a crackdown for the harms but also creating space for innovation in a safe environment that actually gives certainty for innovators. So they stay here in the United States as opposed to going elsewhere. Now Kayla I want to get your thoughts on that as well. I mean any of the folks you that you've spoken to if they raised any issues any concerns here about regulation.
Yeah I think right now regulation is really a wild card. We have RTS chairman Gary Gensler who's expressed that you know he's going to be very aggressive towards rule making around crypto currencies whether they are security or commodity. And so I think those things could really have a big effect on the crypto world as well as Biden's pick for the Office of the Comptroller of the Currency. Oh moreover who also expressed that she believes crypto is creating a more dysfunctional financial
system. So it's really a wild card. What they'll do. We'll have to see and testimony if their tunes change. But you know there is this fight between Democrats and Republicans over whether it's something that it should be hands off or we really need to be active about regulating. And Erica. I'd like to get your thoughts on that as well. Yeah I think that Tonya's point was a really fantastic one to remind ourselves of these cycles late 90s was a period in which a lot of people question just even the need for an email let alone the dot com boom that eventually ended up busting. But what happened from that 20 years later was that we can now herald people like Elon Musk and Jeff Bezos for having been founders during that period to have invented new parts of the infrastructure for the Internet that now can celebrate multi multi hundreds of billion dollar successes. So ultimately our regulatory family and friends and I we just want to invite you
all to come participate on this side and really just recognize that we've experienced these cycles many many generations a time or two. And we know that at the end of the day this infrastructure is fundamentally capable of doing great. Good. Let's really get on the same page on how that can work and work thoughtfully together across generations across different industries to say OK this is what we're going to do to protect some of the bad behaviors and the bad actors. But ultimately we're going to say 20 years from now remember back in 2021 when everybody thought it was a fluke that's going to happen because history is repeating itself and nothing is new. So I just want everybody to remember that in all the efforts that we're making today know that this movement will move forward and let's fight on the right side of history. Well said. That's probably a great place to leave it. This has been a wonderful conversation. Our thanks to you Eric. Our thanks to you Tanya and thanks to you Kayla.