NEW YORK (AP) โ A software developer twice invested his savings in cryptocurrency, only to lose it all. But he still promotes it to the black community and would like to go back to it.
A recent college grad and a single mom are getting their lucky break into bitcoin after attending a crypto workshop sponsored by rapper Jay-Z at the public housing complex where the hip-hop star grew up.
But a former cryptocurrency exchange executive is disillusioned by the false promise that cryptocurrencies will help her family in Ethiopia's war-torn Tigray region.
All were drawn to the idea of โโcryptocurrency as a pathway to wealth creation outside of traditional financial systems with a long history of racial discrimination and indifference to the needs of low-income communities. But The collapse of cryptocurrencies over the past year has dealt a blow to that narrative, fueling a debate between those who continue to believe in its future and skeptics who say misleading advertising and celebrity-fueled hype have lured vulnerable people into an unproven and risky asset class.
The collapse of two crypto-friendly banks this month, Silvergate Capital Corp. and signature bankcomplicates the picture. Its failure was a setback for crypto companies that relied on banks to convert digital currencies to US dollars. However, the crisis reinforced bitcoin, the oldest and most popular digital currency, by reinforcing the mistrust in the banking system that helped give rise to cryptocurrencies in the first place.
Mariela Regalado, 33, and Jimmy Bario, 22, residents of the Marcy Houses complex in Brooklyn, began putting $20 or $30 in bitcoin every two weeks after attending "Bitcoin Academy," a workshop sponsored last summer by Jay-Z and Jack. Dorsey, co-founder of Block Inc., the parent company of the Cash App mobile payment system.
โI don't see it as something that will get me out of Brooklyn and buy me a $2 million mansion in Texas,โ said Regalado, an educational consultant and mother of one young boy. "But if it does happen, I'm all for it."
Only a small minority of the US population owns cryptocurrencies, but adoption increased during the COVID-19 pandemic as low interest rates made borrowing money and investing in risky assets more attractive. Prices peaked in 2021, and a constellation of apps, exchanges, and even ATM-like crypto machines made it easy to buy digital currencies.
But cryptocurrency's downsides played out dramatically after prices plummeted in 2022, wiping out millions in investments and sparking a cascade of bankruptcies and layoffs at cryptocurrency exchanges, lenders, and other businesses. In addition to their volatility, cryptocurrencies lack protections such as deposit insurance, since they are not controlled by any particular institution. Largely unregulated, the industry is susceptible to scams, hacking, and fraud.
Cryptocurrencies are based on decentralized ledgers, usually blockchain, which allow peer-to-peer transactions without intermediaries like a bank or government. That continues to attract many people who face barriers to traditional pathways to wealth creation, such as home ownership, a college education or the stock market, said Terri Bradford, a payments specialist at the Kansas City Federal Reserve, who has researched the popularity of cryptocurrencies among many blacks. investors
โIt doesn't seem like a lot of people are deterred from crypto even though we've seen what's happened,โ Bradford said.
According to Pew Research Center surveys in 2021 and 2022, about 20% of US Black, Hispanic, and Asian adults bought, traded, or used cryptocurrency, compared to 13% of white adults. Bradford's research, which examined data from the Pew Research Center and the Board of Governors of the Federal Reserve System, found that black investors are more likely to own cryptocurrencies than stocks or mutual funds, while the opposite is true for blacks. white investors.
Black and Latino cryptocurrency enthusiasts have formed social media groups, written books and hosted summits to promote minority developers in the space and champion the potential of blockchain technology to create more equitable systems in finance and beyond.
But crypto firms also sought to capture a broader market of retail investors through lucrative celebrity endorsement deals and Sport teamsmany directly targeting Black and Hispanic consumers by promoting cryptocurrency as an economic equalizer.
Coin Cloud, a company that makes cryptocurrency ATMs that filed for bankruptcy, released an ad in which filmmaker Spike Lee ridiculed "old money" as "exploitative," "oppressive," and "white," and cryptocurrencies as "positive" and "inclusive."
Tonantzin Carmona, a fellow at the Brookings Institution who researches the impact of cryptocurrencies on minority communities, said that for inexperienced investors, this type of high-profile advertising easily obscures the drawbacks of cryptocurrencies.
Carmona sees the marketing of cryptocurrency to racial minorities as part of a legacy of "predatory inclusion" in the tradition of payday loans and subprime mortgages, risky services that promise access to otherwise unavailable financing. out of reach.
โYou will have a marginalized group, a community that has historically been excluded from access to products, services, opportunities, and all of a sudden they are told that they will have access to maybe some type of alternative,โ Carmona said. "But this access often comes with conditions that undermine the benefits or that will reproduce insecurity for these same communities."
Rahwa Berhe began investing in cryptocurrency while studying alternative financial products during a master's program at the University of Washington in Seattle. The Chicago native tried to carve out a career in crypto, leading a digital asset compliance team at an exchange for four years, only to feel isolated as a black woman.
โIt's like you take all the tech and finance brothers and put them together. I didn't know where I fit in," Berhe said.
His disappointment deepened when cryptocurrencies were unable to help his family in Tigray during the 2020-2022 conflict because a lack of infrastructure and access to electricity made transfers impossible. When she tried to point out these realities to some in the crypto community, social media posters dismissed her as โnegativeโ and gleefully celebrated that the hashtag #eth, for Ethiopia, was introducing people to the digital currency Ether.
Berhe now works with a Stanford University research lab exploring how decentralized web tools can be applied to archiving African artifacts. As for cryptocurrency, she's done for now.
โIt was great until it wasn't,โ Berhe said.
Cryptocurrency advocates argue that minority communities deserve access to a potentially lucrative asset class that is not going away. Many believe another boom is inevitable, comparing last year's crash to the dot-com bust of the 2000s, which, far from dooming the tech industry, only weeded out bad actors and bolstered winners like Amazon.
Andre Mego, program manager at Bitcoin Academy, said cryptocurrencies are an accessible way to teach financial education to a community where many find concepts like investing for wealth abstract and out of reach. At the end of the summer workshop, participants received $1,000 in bitcoin each, most of it through Cash App, which launched bitcoin trading in 2018.
โWhen we talk about accessibility, that generates motivation. Because anyone thinking about investing might think, 'That's something important in the future. That's something I have to save a lot of money for. I don't know if I'm authorized to do this. Am I even part of this conversation? Mega said.
Bario said the Bitcoin Academy workshop at the Marcy Houses complex was his first meaningful introduction to personal finance, though he graduated last spring with a degree in economics from Lafayette University. Growing up, he said, investing was not a realistic possibility in his family, which depended on the income of his father, who worked as a taxi driver in Honduras.
โI always thought, as soon as you get your money, it's time to spend it, as soon as you get Friday's check,โ said Bario, who now works as a soccer coach.
Omid Malekan, who teaches a course on blockchain and cryptocurrency at Columbia Business School, said he hopes the latest crash will disabuse people of the idea that cryptocurrencies are a reliable get-rich-quick route. But Malekan said the crypto industry needs more diversity, not less, and that black and Hispanic youth should be encouraged to pursue careers developing a technology that he believes will be the future of finance.
โPeople who are drawn to cryptocurrencies because of the way the technology works and the promise of a more global and accessible financial system, those people, it takes more than falling prices to scare them away,โ Malekan said. .
Tyrone Norris, the software developer, said he learned to be cautious about buying cryptocurrency the hard way.
Growing up in Washington, DC, Norris studied computer programming in high school and took college courses, but never graduated because he couldn't afford to go full-time. He worked as a contractor, moved across the country, and never owned a home or accessed a workplace retirement plan.
When Norris first decided to invest in cryptocurrency, he rummaged through exchanges and chose MANA, a token that powers the virtual 3D world Decentraland, because he shared his ex-girlfriend's name and saw it as a sign.
He gambled it all in, draining his $4,000 bank account. When his investment in MANA doubled, he started betting on the coins that he thought would be the most lucrative. But one exchange turned out to be a scam and another based in New Zealand lost millions in a hack. Norris's investment went to zero, but two years later, he was back in the game with another $5,000. Once again, he saw it rise and then crash as he began the "crypto winter" of 2022.
โI was a rookie, I didn't understand what I was doing. I was putting my cryptocurrency in dangerous places,โ Norris said.
For now, he is taking a break from software development to focus on building a crypto-backed hip-hop game project. Norris said he has no regrets because the investment introduced him to the possibilities of blockchain.
โI come from nothing,โ he said. "I don't come here expecting anything to be fair."
