By Alice T. Crowe
Imagine trying to take out $40 from an ATM, but the machine won’t give you cash. Instead, it’s a cryptocurrency ATM that only lets you buy bitcoin, and it charges a high fee. These machines allow you to buy or sell cryptocurrency using cash or a debit card. You have no idea that they are not connected to banks or the regular banking system. Many of these crypto ATMs are concentrated in Black neighborhoods. It’s not a coincidence. Crypto companies target Black consumers.
Big crypto firms such as Circle, Coinbase, Ripple and Crypto.com are trying to become banks by applying for special permission, a national trust bank charter from the Office of the Comptroller of the Currency (OCC).
While this does not appear to be problematic, it will allow these firms to offer many of the services that regular banks provide, such as accepting payments and facilitating deposits. Having a name that includes the word “bank” or “trust “can be misleading. Obtaining national trust bank status would give these financial institutions the legitimacy and market credibility they need to gain consumers’ trust. Here’s the problem: these firms don’t have to follow the same rules as banks. For example, banks must keep customers’ money safe and help local communities, as required by the Community Reinvestment Act. Banks make loans with customer deposits for houses, businesses and schools. Crypto companies are not required to carry Federal Deposit Insurance. Crypto is a challenge to trace or freeze. There is no undoing a transaction if it is the result of a scam or theft. Banks have a dispute process and are required to provide recourse for loss or theft. Crypto banks don’t.
To be sure, crypto will benefit those who can afford to take the losses. Yes, traditional financial institutions exclude, exploit and oppress Black people in America. Redlining, loan rejection, predatory lending and banks that overly scrutinize Black customers are real. Black people are all too ready to jump ship for something better. Crypto companies exploit this desire with the narrative that crypto is a panacea for racism and societal ills. But crypto is a very niche market used by only a tiny fraction of Americans, as per a Federal Reserve Board study. The volatility and risk involved can devastate Black community gains.
Given all the celebrity Black faces used to promote crypto, how does crypto benefit the Black collective? Do most people have the financial ability to absorb the losses given crypto’s volatility? Especially when Black families have less wealth than white families in America. White families have six times the wealth of Black families. The wealth gap alone makes crypto a risky bet for most Black people.
Crypto firms target Black customers using Black icons, celebrity partnerships, crypto ball performances at presidential inaugurations, and the placement of Bitcoin ATMs all over the hood, much like predatory payday loans and check-cashing services. Some Black celebrities promote crypto by asking for payment in bitcoin. Beware, the same predatory hands that are reaching out to save Black people may also be there to bite them.
Alice T. Crowe, a lawyer, educator and entrepreneur that has practiced law for over 25 years in New York.
The opinions expressed in this commentary are those of the writer and not necessarily those of the NNPA.
