This week, Fortune Magazine hosted a digital panel, "Banking While Black," that dug into the racism and inequalities in financial services. One statistic, in particular, struck me – the average white household in America has a net worth of $171,000, compared to black households, which have a net worth of $17,150. According to Kevin Cohee, the CEO of OneUnited Bank, this gap exists primarily because of one single real estate transaction – the purchase of a home.
There are many reasons why black Americans don't make high-value real estate purchases at the same rate as white Americans – and they all trace back to racist policies that define our country's history. From the fall of the Freedman's Savings Bank (which left 61,144 depositors with losses of nearly $3 million in 1874) to Jim Crow Laws and redlining, the system has repeatedly failed black Americans.
In particular, redlining delivered a devastating blow to those trying to purchase real estate. In the 1930s, the Home Owner's Loan Corporation (HOLC) generated residential security maps that assigned a risk level of real estate investments to particular areas, explicitly considering the neighborhood's racial composition. Areas that were predominantly black or had a large population of recent immigrants were considered higher risk and less desirable to banks and lenders than those with white residents.
HOLC maps had lasting negative impacts on homeownership, house values, and credit scores in neighborhoods considered "high-risk." According to research from the Hamilton Project, many redlined areas are still disproportionately poor and disproportionately black.
A 2019 study by McKinsey & Co found that black Americans still have difficulty accumulating savings today because they lack access to mainstream financial services. Minorities often rely on more expensive financial services like check-cashing counters because there are fewer banks in their communities. Further, banks in predominately black areas often require higher minimum account balances to avoid fees. The average minimum balance in white neighborhoods was $626, compared with $871 in black neighborhoods.
Don't' worry. I'm not going to tell you that Bitcoin fixes all of this. It doesn't. But, I do believe that the people leading the digital finance revolution can help utilize blockchain technology to create a more equitable and accessible economic system.
For example, peer-to-peer transactions can remove biased third parties from the money transfer process, giving millions of people worldwide access to the global economy. User-friendly blockchain wallets can help people be their own banks and securely manage their wealth with limited fees. Cryptocurrencies and smartphones can give more people access to capital and investment opportunities. And, this is just the tip of the iceberg.
Most importantly, though, we need to recognize systemic racism and build products and teams that address these issues directly. So Today, on Juneteenth, the celebration of the end of slavery in America, I challenge all of us in the space to stay true to the ethos of crypto and use our collective power to level the playing field and right our society's wrong.