President Joe Biden has made narrowing the racial wealth gap one of his administration’s top priorities. Yet, the White House is advocating more government programs when it should be getting government out of the way. By repealing outdated restrictions on who can invest, Washington, D.C., can empower more minority communities to build wealth and overcome historical injustice, especially through promising technology such as blockchain.
To understand the need for action, consider the consequences of so-called “
redlining
.” From the
1930s to the 1960s
, the federal government frequently denied mortgages to residents of mostly African American, Latino, and Native American neighborhoods, stopping millions of people from buying homes and establishing a financial foundation on which they and their descendants could build generational wealth. This policy, like many others, caused damage that has cascaded over time — see
lower minority homeownership rates
and
lingering and large wealth gaps
. Many communities have been kept to the lower rungs of the economic ladder if they were even allowed on at all.
Enter blockchain. It doesn’t know or care what color you are. It can lower the bar to entry for financial investments and keep costs low or even nonexistent. Simply put, blockchain opens the door to the kind of financial opportunities that have historically been out of reach. Minority communities already recognize blockchain’s usefulness: They account for
nearly half of all cryptocurrency owners
, and African Americans and Latinos are
more likely to use it than others
.
Yet, cryptocurrency is only a small part of blockchain’s potential. Perhaps the biggest opportunity remains elusive: using blockchain to make investments outside of stock exchanges, including startups, nonpublic businesses, and real estate. The federal government currently restricts those transactions to individuals making $200,000 in two successive years (or married couples making $300,000) or with a net worth of more than $1 million — so-called “
accredited investors
.” To make these investments, you already have to be rich.
Yet, many minority communities have found it hard to clear those financial hurdles because of discriminatory policies such as redlining. That means they’re being cut off from incredible wealth gains simply because they didn’t start with the same advantages. A
stunning 90% of the world’s millionaires
achieved that status through real estate investing. And once someone can make these investments, wealth can become self-perpetuating, as
returns often run much higher than traditional stocks
. It’s the definition of the rich getting richer because they often have uniquely lucrative investment opportunities, with the added injustice that many who aren’t rich could be, had they and their families not faced discrimination.
The current system encourages these investments to be large, often to the tune of hundreds of thousands or millions of dollars. Yet, blockchain goes the opposite direction, enabling …….
