S&P Global Market Intelligence reporter David DiMolfetta spoke to 451 Research analyst Jordan McKee and Cleve Mesidor, a policy adviser with The Blockchain Association, about who is using cryptocurrencies today and how they might use them in the future. Investing in cryptocurrencies can offer equal opportunities to groups of people who historically have experienced discrimination in their efforts to access legacy banking systems. Banks and regulators must launch more digital asset outreach and education to avoid creating a new digital divide between those who can access the cryptocurrency market — estimated by the White House at $3 trillion — and those who cannot.
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Hi, everyone. I'm David DiMolfetta, a reporter in Washington, D.C. covering tech policy for the Tech, Media and Telecom News team of S&P Global Market Intelligence. Welcome to MediaTalk, an S&P Global podcast, where our news and research staff explore issues in the ever-evolving media landscape.
Today, we're talking about digital assets but with a bit of a twist. This month, we ran a story showing how people of color are tapping more into cryptocurrency investing than many out there perceive. As the Biden administration begins planning its feat to research digital assets further, Black, Latinx and other leaders in the crypto world who have spent their lives building wealth on the blockchain are now worried that a new digital divide will present itself if their voices are not properly heard.
So why is this inclusion aspect so important? We're going to hear why today alongside a breakdown of the demographics from 2 special guests. Cleve Mesidor, a former Economic Development official in the U.S. Department of Commerce during the Obama administration and now Executive Director and Policy Adviser at the Blockchain Association joined us from here in Washington. Cleve is an active voice in the blockchain and cryptocurrency education world who recently ran a Capitol Hill rally calling for more inclusion in the digital asset space.
With us also is Jordan McKee, he joins us from just outside the Beltway in Bethesda, Maryland, leading coverage of the payments ecosystem at 451 Research, a unit of S&P Global Market Intelligence. Jordan recently authored a report on the state of crypto adoption showing that most users are treating crypto more like an asset than a method of payment, and that ease of use and education issues rank as the top barriers to increasing adoption in the crypto space. Jordan and Cleve, thanks for being here with us today.
Thank you for having us.
Thanks for having us.
Great, Jordan, I want to go to you first. I gave a 10,000-foot overview of that crypto report that you drafted up. But I'm wondering if you could give us a further breakdown to the numbers. Talk about any surprising trends you saw when looking at the demographics. And just in general, as we kick into the conversation, if you could give us a sense of the terminology that we'll be looking at here today.
Yes. Absolutely. Well, thanks for having me, David. Great to be on the podcast. So we'll be talking about a few different things today, one of which, of course, are cryptocurrencies, which I think the textbook definition for a cryptocurrency would be a digital currency in which transactions are verified and records are being maintained by a decentralized system such as blockchain using cryptography. And blockchain, of course, is a shared distributed immutable digital ledger of transactions, which is going to be created by and accessible by parties within a given network. So sort of level setting on terminology there, I'll share with you a bit about the survey we conducted.
So this was a survey we fielded back in Q1 of this year with about 1,600 U.S. consumers. And really, the goal was to better understand how they're engaging with cryptocurrencies. And I would say the overarching message from that survey is that it's still somewhat early days here. About 20% of respondents overall indicated that they had participated in cryptocurrency in some way, shape or form, they'd either bought, traded or received crypto. And as you'd expect, a lot of that activity skewed towards younger generations. It jumped up to about 1/3 of Gen Z consumers, 35% of millennials and then it trailed off pretty quickly as we get into older generations, just 6% of baby boomers, 1% of the greatest generation.
A few additional call-outs for you that I found pretty interesting, right? So we saw some notable differences in a few other areas. 28% of males had engaged with cryptocurrencies in some way, shape or form, just 12% of females. We saw some differences as it related to the respondents' location: 31% of consumers in urban areas, just 15% in rural areas, 16% in suburban areas. And we also saw some pretty big differences with income.
And just to give you a little bit more context on how these respondents that indicated they had used cryptocurrencies were actually using them. Really, the headline is that while most cryptocurrency users are buying these coins, a much smaller percentage are selling them and even smaller percentage are using them as a payment method. Less than 1 in 5 of those that own cryptocurrencies have actually used it to make a payment. So really, the big message here is most cryptocurrency users today treating it more like an asset kind of like a stock. My hunch is the overwhelming majority of consumers probably haven't actually moved their cryptocurrencies from the exchange where they purchase them into a wallet.
And just to quickly wrap up here, David, I'll give you a little context on the nonusers, right, because that was the majority of the sample, 80% of respondents had not used cryptocurrencies. The 3 biggest adoption inhibitors that we saw: one understanding of the blockchain; two, lack of investing in general; and three, the overall complication of purchasing cryptocurrency. And on that latter point there, I think at least 2 of those factors can probably be addressed through further education and user experience improvements in crypto exchanges and wallets. So in summary, about 1/5 of consumers are using cryptocurrency today in some way, shape or form here in the U.S., a lot of that activity skewing towards younger and more affluent consumers. And among those that are actually using crypto, the general trend is around treating it more like an asset with the hope that it's going to appreciate in value over time.
Jordan, that's great. Thanks so much for the breakdown there. Cleve, I wanted to jump to you now. That was a pretty comprehensive outline of the report. Anything from there surprise you? And tying in our coverage on this that I had chatted with you about on the Ariel-Schwab Black Investor Survey, could you perhaps contribute to the demographic breakdown a bit further and talk about how people of color are getting involved in crypto investing and digital assets?
Yes, yes. So Jordan's research is wonderful, but it's important to note that the majority of that usage is happening among Black and Latino communities. Why?
It's because communities that have a relationship with money, relationship with this relational financial system that has not been so positive, looks for alternatives. Even when we look at the Fintech space, the reason the Fintech space grew and actually became prevalent is because these companies recognize that people were operating outside of the traditional financial system. People are finding ways to transact and Fintechs leverage that. And so for communities of color, alternative options are not seen necessarily as risky as the traditional financial system that's actually seen as risky.
Now a lot of people would think that, that's just the unbanked, right? In the U.S., that estimation is about 65 million to 70 million people. But it's not, right? It's also professionals like myself, a GenXer with a Master's degree from Howard University that makes really good money. But I've never been treated the same way by wealth managers or by banks, right? I'm more likely to get pushed in a subprime predatory loan than my contemporaries. And even Black and Latino small businesses and nonprofits face this as well. So I anticipate we're going to see adoption growing within Black and Latino communities. And again, that's at that core is, what is that relationship with money?
And going back to how people are using cryptocurrency specifically, yes, absolutely, I think, because there's more options for holding right now than for transacting. And I think we know that there are thousands of cryptocurrencies. But I think as we go more into stable coins and opportunities for payment platforms that are based on a stable coin that's pegged to an asset, we're going to see more of payment opportunities that are faster, cheaper and we can ensure those transactions are automated in a, again, cheap and fast way as well.
But I would say for the Black and Latino community, I've been in this space for about 6 years. There are people who have been at this space over the last decade who have been doing this education. It was not the industry that actually led to this high adoption, it was innovators of color who went into our communities. But I would say for us, we are not just looking to cryptocurrencies, we're absolutely looking at blockchain. We're looking at the technology and its applications for ownership. There's a lot of talk about privacy, and privacy is important. But when communities of color look at the potential for blockchain technology, it is this opportunity for ownership. So there's lots of projects.
Obviously, a small scale where Black and Latino innovators are building products and services on blockchain to address inequity, to tackle financial inclusion. And I think once we actually start looking at use cases and utility and beyond the store value that is really driving products and services right now for large companies, we're going to see the adoption is pretty comprehensive among Black and Latino communities.
And obviously, Jordan's research shows, obviously, that skews younger, I'm a GenXer. But for the audience, right now, we live in a marketplace that's dominated by 4 generations, right? Baby boomers, we know -- they own their wealth. GenXers like myself, we're a small generation, but we're a pretty powerful generation. And obviously, millennials, the largest generation since boomers really created the sharing economy that has really made decentralization possible. And then zoomers, those in high school and college right now that somehow have the most disposable income who will really be the generation that really commercializes and creates a true marketplace for crypto. I hope that's helpful.
Great. Yes. Cleve, thank you. You had touched on the inclusion bit just now. I want to go over to the crypto rally that I had attended that you were running that's played a big role in the written story I did on this topic. Talk a bit about who showed up and then tying in Jordan's remarks and research at the start here, what was the big takeaway from the rally? What were participants trying to tell onlookers, the U.S. government, anyone else who's interested in the crypto space, what was the big message?
Yes. So I collaborate with leaders across the Black and Latino community within crypto. And one of the impetus for this rally was a frustration by these innovators who have been in this space for over the last decade, who are critical in terms of not just operating as software and hardware developers who are miners and stakers, who work at these large companies, but we feel we are hidden figures. We are in the blind spots of policymakers, in some cases, the industry but also of the media to a large degree.
So we thought about how do we actually have a voice. So many of these leaders that participated, they -- well, actually all of them represent large networks of communities. So the plan was to be in Washington, right? Having that bully pulpit where we would -- we knew would get the attention of, obviously, members of Congress, the media, but as well as the industry as well. And we had leaders fly in from California, from Ohio, coming from New York, from Atlanta because the industry leaders who really feel that they drove that adoption that we're seeing, right, they're the ones in the U.S. that are really driving commercialization of crypto. When you look at the industry, the focus is on the 1.7 billion across the world, across the globe that are unbanked. I'm sure there's the estimation of 65 million to 75 million unbanked here is probably less of a market opportunity. But for innovators of color, we are tackling it at that level.
So for us, the rally on April 4 was really to send that message, and we were so happy that so many people came from across the country. We did get their attention. And one of the outcomes is Senator Cory Booker, who is on the Senate Agricultural Committee that actually has oversight over the CFTC. His staff reached out and said, hey, we'd love to talk to some of these leaders. And we're actually doing a round table, a 1-hour roundtable, where the Senator is going to be sitting with the Black and Latino leaders. And interestingly, I suggested we do a Q&A, and they said, yes, we should. The Senator is going to ask these leaders questions. And while I expected that they would ask him questions about policy, but he is very interested in learning.
I think even for when we see policymakers as they're looking at how to move this conversation forward, right, how to expand the debate that's been happening in Washington, what I'm seeing is people want to talk about how -- what are the implications for future work, right? What are the implications for entrepreneurship and small business growth? What are the implications for financial literacy because when we look at the 1990s when we debated the Internet, we didn't have those conversations and look at where we are today.
A bit of a policy theme that prevailed throughout the rally was actually coming from the top of the food chain in the U.S. government. The Biden administration in March rolled out a sweeping executive order calling for financial regulatory agencies to research digital assets further. Cleve, could you give us a breakdown of that? And Jordan, I'd love to hear your reactions to this as well, whether or not we think it's a good step in the right direction for the future of the digital asset world.
Let's be honest, right, the executive order really is just looking for a study, right? It's really looking for agencies across the federal government to look at what oversight do they have right now, right? What are some of the risks and opportunities that they see? And in some cases, like commerce, what is a potential framework that could play? So -- and I think that's important because we do need to know which agencies have jurisdiction, have oversight to figure out where we need more or where we need less, especially since we're still working through is this -- is are cryptos a security or a commodity. And I think there's too many -- the space is too dynamic that it will fall into one category.
But back to financial inclusion, I was happy that, that was one of the areas that the executive order focused on as well. Because let's be honest, as we enter this innovation age where the innovation economy is going to be driven by emerging technologies like blockchain and cryptocurrency, we cannot afford to continue to leave people behind. Monetary policy has to be focused on closing this wealth gap that exists in this country.
Yes, those are all great points, Cleve. And maybe just quickly to piggyback on your point around financial inclusion. I definitely see that as one of the prominent drivers that has governments around the world thinking about cryptocurrencies and really a driver that's pushing monetary authorities down the path of CBDCs, or central bank digital currencies. And when I think about CBDCs, I mean, really, in the purest form, right, the goal should be to empower consumers that lack access to traditional financial services with digital payment capabilities that perhaps they never had access to before. And that can unlock a whole host of positive benefits. It can allow consumers to establish a financial identity, to receive government aid, to send remittances back to family and so on and so forth. So that financial inclusion aspect, I think, is one of the real powerful things about how this market is evolving and where it could head to in the future.
It's interesting. Technology will never solve inequity. Technology is just a tool and it takes the will of people to actually use technology to actually create a new pathway that is inclusive, that we're not embedding bias in the design. And I think that would be the test of how we move forward. And I think that's also important when we think about why we can't rush to regulate by enforcement, why we have to look at the impact on our communities.
It's been interesting to see so many people are I would use the word uncomfortable with the fact that Black and Latino investors are leading the adoption here because the assumption that it just made sense that it would be wealthy white males, right? And so there's all these conversations about -- the question is about, are we educated, is there a risk? And I would say that rural communities, urban communities, even those who are unbanked or have been locked out are very prudent about their financial freedom and their financial needs and are looking for opportunities. So I don't think government, whether it be the executive order or Congress, and I don't think government should continue on this path of consumer protection because protectionism equates patriarchy. Everybody should have protection.
We need more empowerment, right? So if we're concerned about risk, we need our government to invest more in financial literacy. We need more investment in skills training. We need greater options for access to capital for entrepreneurs. And then we have to change the system. The way right now things work is those funds go to the same usual suspects. We're at the phase of the implementation of the infrastructure law that has a lot of money for this stuff. But it goes to the same entities that send it to the same groups that are not connected with the communities that have impact.
Similar to the PPP loan that had the greatest of intentions, right, target e-commerce businesses, independent contractors. And what was the result? The majority of the money went to hedge funds, wealthy businesses because we didn't change the system. We didn't change the parameters. So banks did what they need to do to be compliant, they went to their typical clients.
Let's talk about it a bit more actually. Looking ahead here, it's clear that from what we're hearing from both Cleve and Jordan today, there has to be a proper way to do this. I'm wondering if both of you can jump in here, what happens if we don't enact inclusive adoption of digital assets in the right way? What are the societal and economic costs? What about cost to banks, cost to legacy institutions, cost to general welfare? Jordan, can we go to you first?
Yes. I mean I think I would go back to many of the points that Cleve has already raised. I mean when I think about cryptocurrency and I kind of take a big step back, really, the big opportunity I see is this chance to create an open, universally accessible, interoperable protocol for money movement on the Internet. And if we think about our current global financial system, there's a lot that doesn't work with it, right? It's not interoperable. It wasn't built for the Internet. It's certainly quite expensive, and it's definitely not inclusive, right?
Our global financial system disenfranchise as many of the most vulnerable in our population. And as Cleve had alluded to, even in the U.S., 1/4 to 1/3 of our population is either unbanked or underbanked. You look at the world in its entirety, that figure is somewhere to the tune of about 1.7 billion people and another 1 billion people or so that are underserved by financial services. And there are all these fees associated with minimum balances, you need a physical address, you need a government ID, so on and so forth, right? There's a lot of requirements to engage with our financial system today.
And so the big opportunity, I think, is for crypto to change all of this, to democratize access to financial services. And I think there's an opportunity to go further than we are today. I mean I'll give you a simple example. To buy cryptocurrency today, generally, you need a bank account. And I understand there are bitcoin ATMs, but I think a good starting point would be for exchanges to build a cash network for consumers to add money to their accounts at brick-and-mortar retailers. And there's precedent for that, right? This is something PayPal has done in the past with Green Dot, where you can go to a 7-Eleven or a CVS or a Dollar General, give the store associate some cash, they scan a bar code on your device and those funds get added to your account. So I think what's very important as we think about the evolution of this market is to ensure that we're building it in the most inclusive way possible with the needs of all consumers in mind so that we fix a lot of the gaps that exist with the financial system as it's situated today.
I agree with all that. I think that makes so much sense. We have a new imperative. The world is younger. This nation is younger. But also, we know that the world is browner right? We know that demographics is shifting to more women. So -- and that shouldn't scare people, right? That should just tell us we have to prepare for the future. And so as we look at inclusion and whether demographic shifts are taking place, we have to make sure that we are inclusive when it comes to age and making sure that we're engaging millennials and zoomers but also communities of color. We cannot afford to leave them behind because that will be the majority of the marketplace.
It sounds like that there's quite a lot of work to do. Just now we discuss the future of where digital assets can go, the potential, what it could become. I want to talk about the near term. We have this Biden EO out the door. Obviously, a bit of research has to go into that. That takes time. But from a ground level, where do we go next on education in this area? If either of you can provide thoughts on the best approach to take, where to start with how to best adopt financial education, not just in traditional legacy institutions or legacy investing parameters, but how do we do this the right way with digital assets with cryptocurrency, with NFTs, with any other forms of decentralized assets or tokenization that may come up in the coming years?
I'll start. I think the executive order did actually help with education in Washington. I've been collaborating with the Blockchain Association for the last 3 years. And now I'm the Executive Director to the Blockchain Foundation. But the association represents over 90 companies and has been doing this work to educate staffers. We probably moved the needle, but not that far.
So I think what the executive order does now, it gives a mandate to every agency across the federal government and said, you have to look at this thing, right? And there are deadlines for when you have to look at it from this perspective of what oversight you have, what are some of risks, what are some of those opportunities? And I think that's going to force a lot of agencies to become educated much quicker than they would have had to be before.
But education is our greatest challenge across the board in Washington, but also at the state level where we're actually seeing the most traction and also across the nation with consumers, right, with public institutions. So as I mentioned, I'm the new Executive Director for the Blockchain Foundation, a new entity. It is a 501(c)(3) that is focused solely on education. It is an industry-wide movement. And we're going to tackle this issue of education in a few ways, but one of them is to create a one-stop shop for information. We're going to create a virtual digital assets library. Across the industry, companies are creating wonderful educational materials, but they're existing in one place and then staying there. So this virtual digital assets library will be populated by the industry. They will get to submit their one-pagers, their white papers, their executive summaries, their books. So -- and then we'll hire digital librarian and look to collaborate with the American Library Association so that we can make sure this is disseminated and accessible to people.
And another thing we'll do in addition to the digital assets library is create a certificate program for leaders of public institutions, leaders of nonprofits, leaders of advocacy groups, leaders across the nation, leaders of academic institutions because I've heard from them that they do want to educate their stakeholders, their networks, but they do not want to outsource that. They don't want just crypto people coming and educating. So we have to make sure that we're not just demystifying the language of crypto that we're just making it accessible, that we're empowering and educating the leaders who actually are trusted by large constituencies.
So we're looking at creating a 2-day certificate program with universities like Georgetown, where leaders can come, learn, also hear from industry but also now that this course was created in collaboration with industry and an academic institution that they trust and that the industry partners will be there as they look at how best to educate their constituency, what are some of the support that they need and what are some of the initiatives they may want to implement. So we need more education across the board. We need to make sure that everybody now because we see adoption happening with Black and Latino communities. That means it's happening among working class and middle-class people. That means sooner than later, the workforce is going to actually be paid in crypto.
There was just a study 2 weeks ago -- a few weeks ago that said just that about 60% of the workforce said that they would like to get paid in cryptocurrency. Obviously, we would only do something like that of a stable coin, but the fact that HR people are going to start getting these questions. And also, we know that they're going to be acting for training programs around cryptocurrency as well. So this issue on education has to be accelerated. We have to make sure governments and public institutions have access to information, educational tools to make sure that they're meeting the needs of their constituents and their stakeholders.
All great points. And maybe quickly to add one more on the consumer side. I think it's largely a matter of getting the message out there by reaching consumers where they're at. So for instance, in the survey that we conducted, what we found is the #1 platform that consumers are going to for cryptocurrency research and information is YouTube. And it's probably a good first stop for informing those that already have a vested interest in crypto. But what I would say in conclusion, right, this sector is still in such a formative stage. You really want to reach consumers with these messages around the importance of diversity and equity and inclusion in cryptocurrency. So they will be the drivers of change, right? They'll push for it and they'll push for progress in the space and ideally get us to a point where this becomes a piece of financial infrastructure that pulls everybody in across all aspects of society, across all corners of the population.
And that's so startling that your research showed that the greatest source is YouTube, which I knew I feared, but now that we have confirmation is concerning. We know that when people go to YouTube, they're getting all of these sources, some of them are not accurate. So a little crypto, a little knowledge that's actually accurate of crypto is a dangerous thing because we need people -- we need to make sure that people are getting information that is accurate, that is verifiable, right, that is not going to lead them towards scams. So we definitely have to make sure those access points expand beyond YouTube.
I do want to make one last point. While I'm happy to see that Black and Latino communities are leading adoption, as I said, that's going to continue to happen in the investment side as well as in building products and services on blockchain. But what we know is still abysmal are the gender numbers, right? We know that we're not getting enough Latinas and Black women like me into crypto. And we have to find a way to make sure that we're doing that education. And I do think based on the engagements that I've had, we have to have a different conversation with women, right? The prospect for wealth building through buying Bitcoin is nice, but we need to also talk about professional opportunities within this space as they're thinking about redefining their careers. We know the great resignation at its core is about the potential to work digitally, remotely but also to be entrepreneurial.
So we have to look at -- make sure people know their entrepreneurship options within crypto as well as the ways to fund projects like decentralized autonomous organizations, right? And then we also have to make sure people know that their opportunity for skills training is there. So I think for women, there's different motivators and we have to be more intentional about making sure that we're closing the gap on gender exclusion.
Cleve, I did have a follow-up there since you brought it up, why does that gap exist? Or do you know why that gap exists? And what are some things we can do to amend that?
Yes. I think just like the racial exclusion issue, it's systematic, right? We have a system that is there to exclude. And it's not just there to exclude people of color, but women regardless of socioeconomic background or race.
So -- but also, I think the motivators for women are different. Women are the largest segments of the world, the world's population. And we know even globally, women are not just heads of household, they are running whole communities, right? They're taking care of children and their parents. And so for them, that disposable income is precious, right? If you have that $100 extra this month, the prospect of buying Bitcoin, you know that could be a good return on investment, but also the college fund is a great return on investment, too. Like when you do that math, you look at it that way. So I think the considerations for women are different, especially when you look at surveys that show women are experiencing burnout, women are trying to make it in a professional world as well as home. And then also the greatest impact, the greatest casualty of COVID were professional women.
So I do think we've always had this gender gap that we've had to tackle with across many industries. But I think post COVID, and now that we're looking at an emerging technology that affects the financial services that really has an economic empowerment bent to it, we have to get closer to women, again, understanding that they are heads of households, but their choices are much, much more challenging for them.
Excellent. Well, this has been a very fascinating discussion. And it sounds like there's quite a bit to do in the years ahead for the world of digital assets. Thank you, everyone, for listening, and a huge thank you to Jordan and Cleve for the terrific input here today. We hope you've been enabled to unearth some of the underdiscussed aspects of the crypto and digital asset world, and give a sense of what's to come for crypto investors, whoever and wherever they may be.
To read the accompanying story for this podcast episode, you can search for "Crypto advocates warn of new digital divide as regulators begin inquiries" on the S&P Capital IQ Pro platform or you could find the free link to the story with an Internet search of the same title. Once again, I am David DiMolfetta, be well and stay safe.
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