Could Crypto Help Close the Racial Wealth Gap?

decentralized finance and CRYPTOCURRENCIES it could potentially reshape our financial system, from who participates to who benefits. And one of the big questions people are asking: Could cryptocurrencies, and decentralized finance in general, help close the racial wealth gap? theSkimm spoke to Lule Demmissie, US CEO of social trading platform eToro, about the role cryptocurrencies could play in close the racial wealth gap. Their responses have been edited for length and clarity.

theSkimm: Could Crypto Help Close the Racial Wealth Gap?

Demmissie: First, I respect the size and scope of the challenge of closing the racial wealth gap too much to think that a silver bullet will fix it. This is a monumental and historical error that has been hundreds of years in the making. But do I think that innovations like cryptocurrencies can play a key role in helping bridge that gap? Absolutely. These innovations could be game changers.

We already see this happening. And not just with the racial wealth gap, but also with the wealth gap between men and women, and between the gay and straight communities. And through all the intersections between. Cryptocurrency adoption among people of color in the US is higher than among white people: a 2021 Harris survey found that 30% of black people and 27% of Hispanics in the US US hold crypto assets, compared to 17% of white people.

Crypto, and DeFi in general, offer an alternative to centralized financial institutions, which have historically excluded marginalized groups in the US and around the world. In addition to being a means of asset ownership and exchange, this innovation can also address some key challenges of the unbanked and underbanked populations in our communities. Traditional funding systems have either failed or been unwilling for these members of our community. And their participation can provide them with transactional financial freedom and the opportunity to increase generational wealth.

Education is important when it comes to creating wealth. How can underrepresented communities learn more about crypto and decentralized finance?

Education is absolutely crucial to starting an investment journey, and many resources are tailored to the way a person wants to invest. There are a plethora of educational resources available for the DeFi curious among us. Free resources include access to educational tools through organizations like eToro, which provides educational resources for all levels of investors.

There are also many social groups that focus on investment education and growth, many of which cater to specific communities: black women or AAPI millennials, for example. eToro’s research indicates that investors like to have a social network with which they can discuss strategies and investment ideas.

There is also something to be said for education through trial and error. We are all students of the markets and sometimes it helps to just get your feet wet. eToro has a virtual portfolio option that you can use to simulate your investment journey as you learn.

What risks should underbanked communities be aware of before investing in cryptocurrencies?

Every investment carries risk. Like all innovations, crypto assets carry many risks. For example, Bitcoin it has suffered a 20% sell-off every six months on average since 2011. It is natural for a young market, and the constant fluctuations must be taken into account when starting to invest.

Each investor must assess their own financial situation and risk appetite. Diversification is always a key principle that investors should keep in mind. Never invest more than you can afford to lose, especially in the short term. We do a disservice to people who weren’t born into wealth if we don’t also discuss the potential benefits of long-term investment and learning about innovations.

What can those in decentralized finance do to help close the racial wealth gap?

For tomorrow’s innovations to carry less of the legacy of inequality, we must address our shortcomings. Those of us in the DeFi space need to create a welcoming, education-driven, and accepting environment to open the top of the funnel. Hire diversely: Commitment to diversity must start from within. The builder’s table must have a broader representation and we must help intersectional communities to participate in that first seed of curiosity.

When we go down a path that chills innovation or raises barriers to participation, all we achieve is maintaining the status quo. So, let us ask ourselves: How can DeFi help solve the challenges that centralized finance has not been able to solve on its own? One does not need to cease for the other to exist.

For those interested in building wealth through career advancement, what are some emerging career paths for those who may be interested in getting into cryptocurrency and decentralized finance?

There are so many opportunities in the crypto space. Of course, there are plenty of finance-specific jobs like analysts and advisors, but there is also a need for people who can do more than just finance-specific roles. The financial sector needs other skills such as marketing, creative communications, public relations, customer service, etc.

In fact, having different backgrounds in the room enriches immediate, creative problem-solving and innovation. Building a team independent of financial services expertise encourages you to think like a new investor (many of my team are) and can help devise how to reach people who are just starting to invest.

If you’re interested in a career in retail investing or crypto, and feel like a lack of financial background is holding you back, apply anyway. In an industry thirsty for all kinds of diversity, set yourself apart from the rest.

elskimm

Cryptocurrencies alone probably can’t close the racial wealth gap. But providing educational resources to unbanked and underbanked communities, and diversifying the DeFi industry could help.

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