Can Cryptocurrency Really Help Anyone?
New York Mayor Eric Adams may be the most recognizable champion of cryptocurrency in New York politics, but he’s not the first elected official from the Empire State to tout the potential benefits of cryptocurrency. decentralized virtual banking system and the technology that powers it, the blockchain.
Long before Adams began publicly chatting with Miami about which city loves bitcoin the most, a handful of state lawmakers were talking about the possibilities of the technology. In 2017, Assemblyman Clyde Vanel introduced a list of cryptocurrency and blockchain-related bills, including a bill creating a task force to study how to regulate cryptocurrencies and their potential uses. Vanel, who later posted a YouTube video visiting Bitcoin ATMs at bodegas in his district, and other elected officials continue to tout the economic development benefits of welcoming a booming tech industry. He is also among crypto enthusiasts who see technology as an economic equalizer – a tool not just for the rich to get richer, but for people who have been discriminated against by banking institutions or excluded from investment opportunities, including including people of color and low-income communities. “To open an account in a traditional bank, you have to be a certain type of investor. You need to have certain types of funds,” Vanel said. “With cryptocurrency, the bar for entering the market is really low.”
Although crypto has its rabid fans, it is a volatile and speculative phenomenon, and one that has seen a proliferation of scams and thefts as Congress considers how to regulate the industry. Also, while virtual wallets can provide a way for unbanked people to access a system to exchange money, it does little to help people who don’t have a lot of excess money. to exchange first.
Tonantzin Carmona, a fellow at the Brookings Institution, urged mayors across the country to take a closer look at the problems they are trying to solve with cryptocurrency before adopting it as a solution. “Contrary to what crypto proponents think, cryptocurrency is not currently a good payment option,” Carmona told City & State. “Cryptocurrencies are notoriously volatile, transactions can be slow, they can also be expensive. And unlike cash, cryptocurrencies are still not universally accepted.
About 301,700 households in New York City are unbanked, according to a 2021 report from the city’s Department of Consumer and Worker Protection, meaning they don’t have traditional savings or checking accounts. . These households are concentrated in neighborhoods with higher poverty rates and those that are predominantly black and Latino. The unbanked and underbanked are the ones crypto enthusiasts often refer to when describing the currency’s benefits. Bitcoin and other virtual currencies can be exchanged through virtual wallets, which saves an individual from being approved to open a traditional account.
These wallets have also been touted as a way for immigrant families to send money back to relatives in other countries, as an alternative to traditional money transfer services like Western Union. “To send $100 to Haiti, some places charge us between $10 and $11,” said Vanel, whose parents immigrated from Haiti. “Transaction fees are just fractions of what traditional money transfers are,” he said of the cryptocurrency. Transaction fees for cryptocurrency can be unpredictable, however, with higher fees as the network processes more transactions.
Cleve Mesidor, executive director of the Blockchain Foundation, said it’s not just the unbanked or underbanked who could potentially benefit from cryptocurrency. “The black community – yes, it’s the unbanked people who have never had a bank account. But they are also professionals like me with higher degrees, who are upper middle class, earn six figures, but who have never had the attention of wealth managers,” Mesidor said. “They gave us high-interest mortgages, while our white contemporaries got reasonable mortgages that wouldn’t put them in debt.”
Mesidor, who also founded the National Policy Network of Women of Color in Blockchain, said this history of discrimination is part of why people of color are drawn to cryptocurrency. Although most cryptocurrency investors are white males, Morning Consult data released last fall showed that 35% of black adult respondents and 37% of Hispanic adult respondents were likely to invest in crypto. , compared to 30% of white adult respondents. Another Morning Consult poll found that cryptocurrency ownership was disproportionately high among Hispanic adults in the United States. “There would be no cryptocurrency industry without black and Latino communities,” Mesidor said.
Some state lawmakers see potential in cryptocurrency and blockchain, but not necessarily in how they are currently being used. Assemblyman Ron Kim and State Senator Julia Salazar have sponsored a bill that would create a public virtual banking system, also known as “public Venmo.” The free public system would allow New Yorkers to exchange currency for goods and services, and would also provide the state with a way to pay for benefits and tax credits. The legislation hasn’t advanced since it was introduced in 2019, but Kim pointed to a local currency initiative in the Hudson Valley aimed at encouraging purchases within the community as an early model of how public Venmo and the idea of community currencies could work.
Still, Kim does not believe that the social benefits of cryptocurrency will be automatically realized. His vision for crypto technology adoption involves the public sector creating free tools for citizens, rather than just encouraging private cryptocurrency exchanges to grow. “They’re still taking a fee, monetizing the technology,” Kim said of existing exchanges. “But if we create a 100% free public Venmo, potentially low-income immigrants can trade and they can transfer their monetary value without paying anything,” he said.
Although Adams championed New York City as the next crypto hub, he did not talk in detail about the use cases of how cryptocurrency could work as an economic equalizer, although he highlighted social equity as one of its key benefits. Teaching cryptocurrency in schools is an idea he raised.
“When we hear ‘cryptocurrency’ we think of Goldman Sachs alumni trading crypto on an exchange. And that’s the stereotype,” Kim said. “It’s also, unfortunately, the kind of image I think (Adams) is promoting, because he doesn’t really examine how the technology behind crypto could be used to benefit the public sector. I look forward to having a chat with him, as I am willing to sit down with anyone who has an open mind.