Black Crypto Boom

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Jason Johnson: This is a word, a podcast from Slate. I’m your host, Jason Johnson. Given the racial wealth gap and barriers in traditional financial systems, it’s not surprising that interest in cryptocurrency has surged amongst African-Americans. But after a multibillion dollar crash in its value, many are wondering if cryptocurrency is the path to riches or ruin in the black community. The rise and risks of cryptocurrency coming up on a word with me, Jason Johnson. Stay with us. Welcome to a word, a podcast about race and politics and everything else. I’m your host, Jason Johnson.

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Jason Johnson: The American dream seems increasingly out of reach for many people in the nation, and it has always been a tough climb for African-Americans. Even middle class black people with good jobs and education can struggle because of the systematic barriers to building and passing down intergenerational wealth. That may be one reason why nontraditional methods of building wealth have been so attractive in the black community, including one of the latest cryptocurrency. It has been endorsed by celebrities like Spike Lee, LeBron James and Megan Thee Stallion.

Speaker 2: While the cash in your wallet is issued and regulated by government. Bitcoin is a cryptocurrency like a wild value. It can’t be controlled by anyone. That means that no one person or organization gets to decide how much of it is used. How much of it is in circulation, or what is worth.

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Jason Johnson: And the marketing of Bitcoin and other cryptocurrency to the black community seems to be working. According to a 2021 USA Today Harris poll. Almost 25% of black adults said they had invested in crypto more than double the rate of white Americans. But if you’re not a chart topping rapper or an NBA legend, is cryptocurrency a rocket to riches or another way to separate you from your hard earned money? And is the recent crash in crypto stocks a warning sign or just like a blip in the market? Joining us to talk about cryptocurrency and black Americans is economist Derek Hamilton. He’s the Henry Cohen professor of economics and urban policy and the founding director of the Institute for the Study of Race, Power and Political Economy at the New School. Darrick Hamilton. Welcome to a.

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Speaker 3: Word. Thank you. Glad to be here.

Jason Johnson: For those who do not know, who do not understand, what the heck is cryptocurrency? Just like explain to me, like Denzel says in Philadelphia, explain to me like I’m 12, right? What is cryptocurrency? What is it?

Speaker 3: Crypto currency is a mechanism of value that is stored financial value, the stored electronically that some people use as a speculative means to try to accumulate additional resources. Other people use it as a mechanism of transaction. So a means of transaction. So basically, let me try to do it this way. There are two purposes by which cryptocurrency can serve one speculative, where some people store some of their resources with the expectation that it will grow and give them additional resources or to, as a medium of exchange, as a as a mechanism by which they can use to purchase to sell some product to another entity.

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Jason Johnson: Okay. So we’re going to break those things down because I literally I feel like I feel like a nine year old. Just explain Minecraft to me. I just I’m still confused as to what the heck is going on. So you said cryptocurrency is a way for someone to sort of, I guess, put value put value into something and have it grow in value later. How would that happen? Like, what could I have could I put gold into a cryptocurrency? And then the gold is worth more? How’s how’s the idea of putting something into crypto and then increases in value work?

Speaker 3: Well, you could store the wealth that you may have from gold by translating it, transferring it into cryptocurrency. So basically you have value, you have wealth, and then you use that value to purchase cryptocurrency. And then you there’s a speculative dimension where you hope that that cryptocurrency grows in value so that then you’ll have more value or more wealth. So there’s a speculative dimension to cryptocurrency. You are betting. You are betting on something and expecting that it will grow in time. And as a result, what you put in will be worth more at a future date from which you can take out.

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Jason Johnson: Okay. How does and then you say cryptocurrency can also be used for exchange. So I’ve seen this in certain cities. There’ll be a sign outside of a place it says, you know, we take crypto here. So if I had crypto, where would it be? What would I have crypto on a card? And then if I can go to a gas station that accepts it, they will take crypto off that card like like, you know, showbiz pizza bucks or something or, or chip from a casino. Like, how do I take crypto and use it in exchange for material goods?

Speaker 3: So they are digital or electronic storage. So they’re stored as digital ledgers and just like dollars except dollars might be physical. However, we also have electronic dollars. It is used as a medium of exchange in the way you just described it. You go to a place and if they accept that as a form of currency, then you can get whatever item you’re trying to get. In exchange for that form of currency.

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Jason Johnson: What’s interesting about that, before we go into sort of where the cryptocurrency comes from, as you said, that like cryptocurrency can can increase and decrease in value. Right. Like you can speculate about it. So, for example, if I want to buy a Snickers bar and it costs $0.99 at at Giant Eagle or Topps or Safeway. Right. And I go spend it, you know, I go spend $2.99, etc., etc.. If my crypto is increasing in value, does that mean, I guess, the purchasing power of one piece of crypto increases? How does how does that work? If I’m buying something but the value of my money can go up and down, you know?

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Speaker 3: So if a Snickers bar remains the same in terms of price and the value of your cryptocurrency goes up, then your purchasing power is increased. And effectively for you, that snicker bar is cheaper. And that’s true of other forms of of wealth that people have in store. To me, one of the reasons the cryptocurrency is particularly dangerous, aside from the speculative nature of it, in which case there’s risk that people absorb and its value is grounded strictly in speculation rather than something like, let’s say if you had invested in stocks of of GM motors, where GM motors, there might be some element of speculation as well when you purchase that stock. But it’s also foundational in some tangible item, which is cars, which has some value.

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Speaker 3: Right. With cryptocurrency, the value when people are expecting it to grow is genuinely speculative. There is, you know, a medium of exchange. We already have mediums of exchange. They call dollars and currency. Right. So you could imagine a remote village somewhere in a desolated place for which of currencies, hard currencies like dollars or whatever the nationality currency is, might be in short supply. Or you could imagine even somebody who resides in the United States is trying to help a relative that lives in a remote village in Kenya. And it’s not so easy to facilitate that transaction. But there’s this technological mechanism of some digital currency did afford the ability to get funds to this person in a quick way.

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Speaker 3: Right. That’s fantastic. I like those type of innovations. Mm hmm. But relying on trying to grow your portfolio in something that’s not grounded in in a tangible value, like the example of GM or Apple computers or whatever it is. To me, that’s the risky part. That’s one risk, because, again, it’s grounded in speculation.

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Speaker 3: But then the other risk is macro. Beyond the individual, we’re having private entities get into the business of currency. Mm hmm. That can become destabilizing from my perspective. If we start allowing private entities like suppose Amazon decides tomorrow that they want to issue some crypto type currency and do something like require anybody purchasing an item through Amazon to use that currency.

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Speaker 3: And given how big Amazon is, what do you think that the risk and the power shift can do to democracy and our ability to withstand and go through business cycles and the power of the Fed in general? So two elements. One, the risk that’s borne on consumers from that speculation and to the power that eventually could occur to destabilize national currencies in a risky way for our ability to deal with economic crises.

Jason Johnson: We’re going to take a quick break. And we come back more on black cryptocurrency. This is a word with Jason Johnson. Stay tuned. You’re classic to a word with Jason Johnson. Today, we’re talking with economists Derek Hamilton, about the appeal of cryptocurrency in the black community. So why are black folk so excited about crypto? Like, like like like I see celebrities talking about. I see a ton of athletes on TV talking about crypto. There was the famous, you know, story that at one point OBJ was going to take his salary from the Rams and cryptocurrency. Why has cryptocurrency become so interesting and appealing to to large numbers of African-American celebrities and seemingly sort of black folks just living in America?

Speaker 3: So let me start with the general population. Aside from celebrities, I think in general, black individuals are vulnerable to the appeal of cryptocurrency for two reasons the low barrier to entry. And the expectation and potential for high rewards. So I liken it to a casino. And you know, we can even talk about the analogies to which why are black people overrepresented in for profit colleges and universities? We live in a society that teaches us. You can have a rags to riches story. You just need to get up off your behind and do something. Well, the reality is that it takes some resources to be able to do something. And if you have a population that begins with low resources. But yet the lure and the appeal of self-help and overcoming your obstacles is there and placed upon you.

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Speaker 3: Then, ironically, it is those individuals that really want to be the captain of their fate and do something about their lives that are more susceptible and vulnerable to predatory and casino like infrastructures. And what is left in that way? Well, the traditional banking sector itself, we have a long history of being left out of banking. And when we have engaged in banking, been vulnerable to legalized forms of predation, and we need only go back to the last economic crises of the Great Recession when black people were targeted with subprime entities.

Speaker 3: But in a nutshell, if I sum up the point, the Lord appealed to try to be the captain of your faith and not be broke, but did literally have resources and lack of other options. And the low end recourse to get into the currency is a big appeal that’s attractive to black people. And then ask for celebrities like like anything. If you offer them some big reward to advertise this product, then there you have the right in.

Jason Johnson: And whether or not you understand what it is that they’re endorsing, you sort of assume, well, you know, Matt Damon and Ellen, but like these guys can’t lie, right? They wouldn’t be allowed to get on TV and tell me to get involved with a Ponzi scheme. So so folks assume, you know, heck, even I assumed I was like, well, the FCC is regulating this right away. You know, Matt Damon couldn’t be lying to me. Not good will hunting.

Jason Johnson: So about a month before the cryptocurrency crashes, a big crash. About a month before the cryptocurrency crash, there was a black and Latino crypto rally held in Washington, DC. We have a short clip from Yinka Adeniran of Black Women Blockchain Council.

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Speaker 2: Blockchain has brought us cryptocurrencies, particularly Bitcoin, which is allow us as people to be able to participate in this global revolution of maintaining our self sovereignty and creating financial support for each other.

Jason Johnson: So there’s a whole conversation around cryptocurrency that sounds like this. It’s more than just financial power for individuals. It’s the key to building financial wealth and health and stability for the community as a whole. Is that true? Like, is cryptocurrency the rising tide that will lift all boats and a black community? Like if I am in an impoverished part of Baltimore or Philadelphia or Tampa, Florida, and I say, Hey, everybody, I’m going to open up a corner grocery store and and you guys should all use crypto to buy things here. Like, like, does that uplift the community in some way or is that just sort of the sales pitch for people who want to folks to get involved and start investing in speculation?

Speaker 3: I think the answer is it is not the mechanism for broad uplift. It is that it is almost the definition of a speculative bubble. And for those people that get in and don’t get out in time, at some point that bubble will burst because it is not grounded in something of value beyond speculation.

Speaker 3: So sadly, I think the answer is no. But, you know, again, it speaks to the earlier question you asked me, which is the political appeal to it and the irony of self-help and a desire for, one, to uplift oneself and communities uplift themselves. Well, that generates that vulnerability. And I didn’t really complete the analogy, the analogy, Jason, but what I was trying to allude to with the for profit college, again, that advertisement has certain analogies with the advertisment from cryptocurrency that you reference where you know, they would come and say, Get up off the couch to make something of your life, don’t be lazy. You can come tomorrow and get a loan so that you can go to college and have this degree.

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Speaker 3: And we have all these images and messages in America that tells black people education is the key to success, not quality of education, but education is the key to success. We have all this images and messages directed at black people that tell us, get involved in finance. You know, you got to build wealth. And then again, it is these narratives and the lack of economic power to begin with that leaves us vulnerable.

Jason Johnson: I like how you you put that because this sort of evangelism, whenever there’s something new economically, always sort of taps into black folks. You know, you talk about. Sort of our lack of resources. Do you know who in particular is being targeted? Because when I’ve sat in on those sorts of things, when I sat in those things, it tended to go after a certain kind of black person. It went after 20 something black people, usually with some education, who were on the path to probably middle class life.

Jason Johnson: But the the the idea was, oh, do this, and you could turn into someone who’s wealthy. It wasn’t targeted at people who were poor and it wasn’t targeted to people who had a lot of money. Is that where Crypto was targeted? Because, you know, the people advertising it are already rich. Those Crypto going after young, poor black folks is going after Gen X who suffered through the Great Recession, is going after seniors to make a nest egg. Who who in the black community is Crypto targeted?

Speaker 3: I mean, there is still point and I’ll offer one slightly friendly amendment to the notion of middle class, middle class as relates to income and education, perhaps even occupation, but not wealth in their lives. That key vulnerability, the desire for them to actually be middle class in terms of wealth or have access to wealth. That’s one appeal. And you are right that it’s a specific audience that is often targeted. And there’s irony in this. It’s the audience that really wants to be the captain of their fate and change their circumstances and has some capacity to do so. That’s the vulnerability, because, again, the narrative is study hard, work hard, just keep persevering and you’ll be fine. When you have limited economic power, you are susceptible to predation because of your attitude and desire to change your life.

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Speaker 3: Now, I’m not encouraging anybody to change that attitude. I’m talking about a social structure that has left them vulnerable to these type of messages. And and as you as again, put it, tying into an end, it is the narrative combined with the lack of economic circumstances that we need to change in our society so that we don’t leave people vulnerable to the type of whether it’s cryptocurrency for profit colleges or the ACM that you described earlier.

Jason Johnson: So I like, you know, as the university professor, I’m always and so are you. I’m always thinking about those ideas of sort of barriers to entry. And I’m walking through it in my brain if I want to open up my own T-shirt print shop. Okay. I generally know, I guess I would have to go to a bank and get a loan. And then, you know, the bank can tell me, no, I’d have to have nice clothes. I’d have to explain business, have a business plan. And if I don’t know anything about the SBA, that’s not going to help me. So there’s real barriers of entry to getting a business loan from Chase Bank, whatever. What is the how do how do you get into crypto? Can I just go online and go to a site and say, I’m putting in $100 in Dodge Coin or something else like that? Like how is the barrier of entry lower for crypto than it is for just going into my bank?

Speaker 3: Well, the dollar amount is low. So, you know, the key thing that you let off that you let off with in the previous example was capital itself. So if black people had capital, then they would be less vulnerable when they go in to get a loan to start a business. So with crypto, there’s not a huge barrier with regards to dollar value to get in small denominations allow you to get access to cryptocurrency and those mechanisms, you can literally go online to start investment into crypto and now you can even go down to some corner stores and purchase cryptocurrency.

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Speaker 3: So the barriers are really low, but the most key low entry barrier is capital itself. Just like a casino, you can go into a casino with a low dollar amount with the hopes of trying to make it big. And you’ll see when you go to places like Atlantic City, Las Vegas, even Detroit, you can see casinos crowded with a lot of people who demographically are vulnerable because again, the law and pull of trying to change your lot life with very little becomes attractive.

Jason Johnson: We’re going to take a short break and we come back more with Derek Hamilton about black people and cryptocurrency. This is a word with Jason Johnson. Stay tuned. You’re listening to a word with Jason Johnson. Today we’re talking with economist Darrick Hamilton about black people and cryptocurrency. So. The next part of this, right. Is that because of institutional racism, you know, black people. Do not necessarily have, as you said, the capital to sort of build from. My understanding is part of the appeal of of sort of cryptocurrency also to black people is this idea that because it’s based on technology, because it’s global, it frees us from sort of the clutches of white supremacy.

Jason Johnson: Right. It’s similar to those arguments, you know, 15, 20 years ago about, hey, you can find out that as a black person, you technically don’t have to pay taxes because, you know, it it comes from those same places that, you know, you and your Scooby-Doo friends have figured out this method to game the system in a way that nobody else has. You know, is is that in any way true? Is crypto somehow somewhat freer from the the the strictures of white supremacy that affect the economy in a way that other things are not? I mean, is there some truth to that, that crypto is is at least a little bit more liberated?

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Speaker 3: So we have a friend, Ruth Benjamin, who’s a professor at Princeton University who wrote that book, Race the Technology. I think she has the framework to really answer that question. Basically, are are robots not racist or can robots free us from racism? The answer is absolutely not, that what robots do is amplify existing structures that are already in place in a way that basically replicates those structures without some interventions. So if we have a structure of white supremacy and racism to begin with, believe in that technology in and of itself, in an undirected way to liberate, liberate us from that. The reverse is true. What will happen is that the technology will amplify those existing structures. So that was the general comment.

Speaker 3: But if we get specific to cryptocurrency, I think the answer is still no. The answer is still no. Not only for the reasons I just described, but also that that lack of regulation, ironically, will leave us more vulnerable. But when that speculation ends and the bubble bursts, we’ll be less protected from some of the the some of the costs that are associated with that. And what’s more, some of the and we’re starting to see this right now, some of the fraud that’s taking place when people use this lack of regulation and ways and anonymity to literally steal money. We’re seeing examples of that.

Speaker 3: Well, again, in an unregulated market, we’re particularly even more vulnerable to that type of malfeasance because we talk a lot, Jason, about economic capital that black people don’t have. You know what else? We don’t have political capital. So the political infrastructures to come in, the Department of Justice to come in and protect us when malfeasance takes place. Historically, we have not had that either.

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Jason Johnson: Let’s say I’m already into crypto and I’m not revealing anything, but let’s just say I’m on the crypto, right? Let’s say I’ve put money into it or I got my uncle put money into it or my family put on something. I’ve already in crypto. Is there a smart way for people to operate in it? Is crypto one of those things where if you are a sophisticated person with disposable income. All right. Hey, hop in. Hop out. Is it like day trading? You know, is is there a safe and profitable way for people to get in and out of crypto if if they like it? I mean, is that is that possible? It’s like leaving the table when you’re still hot at the casino.

Speaker 3: There’s potential for profitability. And that’s clear. We’ve seen some people make a whole lot of money out of it. That word safe. I’m not sure about that. So it’s risky. It’s a bit speculative if some people, you know, want to take chances. The smart thing would be to get out when you can in a profitable way. I don’t have the advice for them because I don’t know, though I’m certainly not a financial adviser and I’m I’m certainly risk averse myself. But if those did want to take chances and have the wherewithal, those that have the financial security where they can withstand a lawsuit if it occurs.

Speaker 3: I mean, we’re seeing cases now, people losing their life savings, and that’s terrific. People using it as a mechanism with an expectation that they can change their lot in life when they’re starting from a low level. That that’s sad that that is, you know, and I’m wary of those individuals. I’m certainly not casting judgment at them because where I’m casting the judgment is the structure that has left them vulnerable in the first place.

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Speaker 3: But for those people that have some resources, hell, I like going to Vegas sometimes and gambling on whether LeBron James is going to win a championship. I view that as entertainment money and I have some resources where I could stand to lose. So those people that want to gamble, I’m liberal. Hey, go ahead. But the vote. Abilities associated with it and the expectation that this is a mechanism of uplift more broadly, that I’m glad you’re doing this show so that we can, with uncertain terms, make the case that that is not the mechanism of uplift.

Jason Johnson: And anybody out there who’s trying to put money on LeBron winning another ring should just stop right now. It’s not going to happen. So I want to ask I always I always it’s not necessarily even optimistic, but I always want to be sort of forward thinking at the end. So I have lived long enough to see all sorts of ideas and technologies again come and go. Like I remember again selling long distance got you know it was a cute idea was network marketing it was ended by the cell phone industry, you know, selling blinds. I mean, there’s all sorts of things that have come in and out of popularity. I mean, heck, you know, at one point I remember this thing called the laserdisc and eventually got beat by the DVD. And now the DVD is pretty much worthless because we have streaming.

Jason Johnson: Where do you see cryptocurrency going in another, you know, five years, not even a decade, but just another five years? Is it the kind of thing where it’s going to increasingly shrink to just the niche where people at crypto conferences will share it with each other and it doesn’t have any other value? Do you see some, you know, larger entity, you know, is target going to say or Wal-Mart going to say, hey, look, you know, we’re offering cryptocurrency deals, etc., etc.? What direction do you see cryptocurrency going in in the United States in the next five years?

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Speaker 3: I’m going to answer that in three ways. One, I’ll lead with even, you know, the example of laser disk. This people can’t predict the future. New forms of technology come and make it obsolete, but at least that was grounded in some value. It wasn’t all speculative then. The answer to the other question I’d say that if not crypto, it will be something else until until we develop a social safety net that leaves people less vulnerable to the lure of trying to get rich with low barriers of entry. And we can name what those are public banking, for instance, and ensuring that everybody has an electronic account so that they can engage in banking and transaction as a human right.

Speaker 3: And then, you know, I’ve talked a lot in this perhaps for another show about baby bonds, ensuring that everybody has a birthright to capital so that they can get into traditional mechanisms of economic security and asset building like a home life in education, without debt, like some capital to start a business so that they can reap the rewards of the entrepreneurial spirit, or like simply just having the financial security associated with a retirement account. So we need things like that. And, and if we have a system in place that assures that people have some baseline level of resources so that they won’t be asset poor and then other forms of of technology come along like cryptocurrency.

Speaker 3: I’m less concerned. I’m less concerned for all the reasons that we’ve described before. If you want to take risk and be speculative, but you have some social safety net where it’s an authentic choice, where the choice to purchase cryptocurrency is grounded in really a choice, not grounded in some notion that you had no choice if you wanted to get part of the American dream. But to get it, I’m okay with that. That to me is a vision of a good society that facilitates, dare I say, capitalistic content or other forms of entrepreneurial spirits and innovations, but does not do it in a way that leaves particular people. And you describe the Jason black people with a with a spirit to want to uplift their life, really vulnerable to this type of structure.

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Jason Johnson: Derek Hamilton is the founding director of the Institute for the Study of Race, Power and Political Economy at the New School. Thank you so much for joining me on a word today.

Speaker 3: Thank you, brother. Please bring me back.

Jason Johnson: And that’s a word for this week. The show’s e-mail is a word at Slate dot com. This episode was produced by Jasmine Ellis. Alicia montgomery is the vice president of Audio at Slate. Our theme music was produced by Don Will. I’m Jason Johnson. Tune in next week for work.