Wall Street is now in the Bitcoin game. On Tuesday, one of the world’s most important trading bodies announced it was creating a suite of indexes that would track cryptocurrencies. The move by S&P Dow Jones Indices follows other major developments mainstreaming Bitcoin, such as when the NFL’s No. 1 draft pick put his entire multimillion-dollar signing bonus into crypto last week and when no less than Sotheby’s announced this week that it will accept cryptocurrencies in an upcoming auction.
Bitcoin adoption has powerful advantages precisely because it operates outside the current system. It’s a borderless, decentralized, peer-to-peer currency that has no central authority.
But much of the benefit of Bitcoin, the world’s leading cryptocurrency and the best-performing financial asset of the last decade, is how much it can help people with less access to — and trust in — the world’s major financial systems, such as people in developing countries. Where economic instability, high rates of poverty and limited access to financial services erode social trust in central governments, Bitcoin adoption has powerful advantages precisely because it operates outside the current system.
Bitcoin is a borderless, decentralized, peer-to-peer currency that has no central authority, such as a government or a central bank. Every transaction is done via a digital ledger — called a blockchain — with an immutable encrypted signature to secure its authenticity. In this way, it’s trustless, meaning it doesn’t rely on a third party or an administrator to preside over the flow of capital. Neither governments nor banks can interfere with transactions, or manipulate or discriminate against anyone based on their so-called qualifications. And unlike other major cryptocurrencies, Bitcoin has a finite supply, 21 million bitcoins, thereby limiting risks of inflation.
In developing countries, mistrust of government and financial systems and devaluation of currency due to inflation have contributed greatly to Bitcoin’s appeal. But groups that have suffered traumatic legacies of oppression and economic exploitation under the national financial structures of developed countries, including the United States, can also gain by embracing Bitcoin — in particular, the Navajo Nation, the largest Native American reservation in the U.S., which has struggled to share in the largesse of the U.S. financial system.
Growing up on the Navajo Reservation in Chinle, Arizona, where my parents were teachers, I observed daily life on the reservation through a child’s eyes. I was awed by beautiful tribal ceremonies and Navajo culture. However, I also saw a stark existence that I would understand only years later was tied up with the community’s struggles with poverty, gambling and alcoholism. Once we moved off the reservation, the inequality there became readily apparent next to the surrounding middle-class communities, which seemed incredibly prosperous in comparison.
According to census data, the poverty rate for Native Americans is 25 percent, more than three times that of white Americans, and unemployment is nearly twice the rate of whites. In 2016, the FINRA Investor Education Foundation reported that Native people are the least likely of all population groups to plan for retirement or have emergency funds or checking accounts.
The modern difficulties of life on the reservation are direct effects of centuries of economic persecution. For instance, Native American currency, known as wampum — decorative beads made from whelk and clam shells — suffered drastic devaluation after European settlers armed with superior resources and manufacturing were able to produce wampum at a rate far surpassing that of their Native neighbors.
Leaders in BIPOC communities (Black, Indigenous and people of color) have started to use cryptocurrencies to establish independence from historically oppressive dominant cultures. Isaiah Jackson, author of “Bitcoin & Black America,” told CNBC this year, “For the first time in history, we have a Plan B option to the current financial system, which has seen years of redlining, racial discrimination and other egregious acts by retail banks to the Black community.”
Similarly, in 2013, Payu Harris of the Oglala Lakota tribe in South Dakota founded MazaCoin, a digital currency described as “the first Native American cryptocurrency.” Harris’ goal was to provide an economic solution to his community’s problems, which included widespread alcoholism and unemployment and an average life expectancy just shy of 67 years. Harris also championed the dedicated tribal cryptocurrency as a “chance to show our unique identity.”
While MazaCoin hasn’t generated significant long-term value, Bitcoin holds tremendous promise in tribal communities as a sovereign monetary system, both symbolically and practically. By holding wealth in Bitcoin, Native American communities can cultivate sovereign economic systems and move toward eliminating reliance on the allocations of the federal government, which has continually short-changed them.
Recent media attention has focused on the energy-intensive processes involved with creating bitcoins, known as “bitcoin mining,” an issue of importance to an Indigenous population long concerned with environmental preservation. But research has found that Bitcoin’s energy consumption is similar to that of the traditional banking sector.
Bitcoin’s move to the mainstream is an exciting development for the industry. However, amid buzzy talk of its value and new friends on Wall Street who have an eye toward profits, it remains critical to stress the underlying principles of Bitcoin and why it promises a better future for those disadvantaged by legacy financial systems.
My early experiences on the Navajo reservation exposed me to the deeply divided reality of America, stained by a legacy of injustice. Bitcoin restores financial freedom to those who have been disenfranchised for far too long and allows communities to separate themselves from the systems that have worked against them. For groups that are disproportionately affected by systemic economic injustice, such as Native Americans, adoption of a sovereign currency free from a history laden with persecution is an increasingly empowering path forward.