For the black community, bitcoin represents an opportunity for wealth preservation

The Bitcoin narrative has moved far away from early investors’ vision of it enabling financial freedom, at least in the United States. But for many in the black community, that narrative is still alive, and it’s important that people stay focused on it.

Bitcoin’s core values—decentralization, censorship resistance, its peer-to-peer nature—are pushed aside time and time again as the industry tries to grow in a world driven by intermediary institutions. Open an account on a centralized exchange that Coin base or Kraken (or, until recently, FTX) is the easiest and most common way to get into crypto. And it’s a safe bet that most people are playing the speculation game, trading crypto on an exchange rather than trading directly with another person as bitcoin was intended.

However, it is a long game to play, especially for the black community. Thanks to bitcoin’s core values, anyone can store their wealth or move it around the network, and no person can stop or control it. For black people, it’s a golden opportunity to level the playing field and give them “sovereignty” over their wealth, said Lamar Wilson, founder of crypto-focused network Black Bitcoin Billionaire.

“A lot of our history with America has not been the greatest,” Wilson told CNBC. “When black people have put their money into things in the past to build wealth in this country, it’s been forced out of their hands, it’s been taken from them, it’s been burned down or destroyed.”

In the 19th century, Seneca Village, Manhattan’s first known community of African-American property owners, was destroyed to build Central Park, for example. The Tulsa massacre, also known as the Black Wall Street massacre, occurred in 1921 when a white mob burned the richest black community in the United States to the ground in the Greenwood district of Tulsa, Oklahoma. A couple of years later in California, Manhattan Beach officials evicted Willa and Charles Bruce, claiming eminent domain. That land was returned to the Bruce family last year.

“Bitcoin is a resource that you can actually store and keep yourself, and nobody can take you,” Wilson said. “This provides a way to be part of an asset that is globally liquid worldwide.”

Fast forward to today and black people are still largely starting their wealth building journeys from behind. According to an FDIC survey, the share of US households that were unbanked in 2021 was the lowest it has been (4.5%) since the banking regulator began the survey in 2009. Yet, within this group, at all income levels, there is wide disparity in the unbanked interest rates between black and white households. Ultimately, this discrepancy shows up in the stock market’s racial investment gap.

“The things we see in our financial system that are meant to protect and hold banks accountable can also end up being a double-edged sword that causes exclusion for certain populations in the financial system,” said Courtney Robinson. Block’s global leader for financial inclusion and policy development.

For example, the Know Your Customer law could prevent someone with a particular last name from signing up for an account, she said. And in some banks it can cost money just to be able to keep money in a basic checking account.

Robinson said bitcoin is an opportunity “for people who historically have either been left out of the banking system or have been involved in it in a way that’s made it difficult and sometimes expensive to transact without running into those barriers.”

Trade in bitcoin

According to the Federal Reserve’s latest report on the financial well-being of US households, released last spring, crypto investors in 2021 were “disproportionately high-income, almost always had a traditional banking relationship, and usually had other retirement savings.” About 46% had an income of $100,000 or more.

In contrast, lower-income adults (with less than $25,000 in annual income) were more likely to use cryptocurrencies for transactional purposes than investing. However, that is not true for Wilson.

“I work in these communities in terms of education, I stay around this community as well, and that’s where I’m from – I haven’t heard anyone say they’re using bitcoin or any other cryptocurrency just to trade and it just doesn’t meaning,” Wilson said.

“Who are they spending time with?” he added. “If it’s peer-to-peer, there’s probably more people who just use the Cash App.”

Block’s consumer app does not require customers to link a bank account to sign up.

Robinson was similarly skeptical of the data, saying it seems more likely that people who buy bitcoin want to hold onto it. However, she said that much like how bitcoin found (general) acceptance in the investment community as an alternative, bitcoin may gain the same acceptance in certain communities as alternative money.

“We’ve continued to grow into a world where people are choosing to use it for a variety of uses,” she said. “In the US, I think we will see cryptocurrency become another form or way for people to transact alongside other ways they choose to bank. I see it ultimately becoming a matter of choice, something that fits into our existing financial regulatory system .”

Keeping communities educated

Bitcoin has come a long way in the past 14 years, but there is a possibility that crypto may not go from mass acceptance to mass adoption, according to Tyrone Ross Jr., president and founder of financial planning firm 401 Financial.

He said bitcoin’s ability to serve those who have been turned away from the formal financial system is “the only indisputable use case” for it, and it is critical that black communities stay educated about the opportunities to store and build generational wealth, as well with which the challenges make it historic.

Although crypto has grown to a $1 trillion market cap in a short time, it has a long way to go to reach mass adoption. It suffers from some of the toughest peak-to-trough moves in its bear markets, including the current one.

Long-term investors like Wilson, who has been in crypto for about 10 years, are leaning on bitcoin’s key properties to get through the so-called crypto winters, especially its steady supply.

“Is it volatile? Yes. But we know that trajectory, based on it being only 21 million [coins]has always gone up when more demand comes in,” he said. “I don’t know that there are too many other options out there that give you the level of freedom that bitcoin provides, without someone else having control over it.”