Installing the Guardrails for Cryptocurrency, the New Financial Frontier

WASHINGTON — Charlene Fadirepo, who has worked in banking for about two decades, is one of the millions of Americans who started investing in cryptocurrencies when stuck at home at the start of the pandemic.

“As a traditional banker, once I kind of got beyond the currency part of Bitcoin I realized it’s really a global monetary network. It became clear to me that it represented the beginning of a brand new financial ecosystem,” Fadirepo said during a Zoom interview.

Now, about 16% of Americans have invested in or used cryptocurrencies, according to a 2021 Pew Research survey. And despite the recent volatility causing Bitcoin — the largest cryptocurrency — to tumble to around $20,000, investors, financial advisors and lawmakers see a need to embrace cryptocurrencies as a new financial frontier.

Communities of color have been the most likely to embrace cryptocurrencies, according to the Pew study with Asian, Hispanic and Black Americans participating in that market at a higher rate than White Americans. 

Fadirepo, who started the company Guidefi to connect mostly women of color with financial advisors, said she saw the women she worked with more likely to take a chance on Bitcoin because historically they’ve been shut out of traditional financial markets.

“These communities are just more open to something … open to this idea that it’s [a] software financial system that might not have the human bias of our traditional ecosystem, might be more fair,” Fadirepo said. “And in many cases, it is more fair because Bitcoin as a lending facility allows people to lend against their assets without a credit score.”

Because cryptocurrencies know no countries’ borders, they are also often a better alternative for people sending money to loved ones in foreign countries to avoid bank fees.

“Bitcoin represents a chance to build a monetary system that is as inclusive, equitable and diverse as the world. So that’s why … I wanted to be involved but also to engage communities of color to get involved as well,” Fadirepo said.

Since Bitcoin started as the original cryptocurrency in 2009, it grew to about $69,000 at its height. And others have followed suit attempting to cash in on the new wave of digital assets. And that success brings along scammers.

The Federal Trade Commission reported earlier this month Americans have lost over $1 billion in cryptocurrency scams since January 2021. Crypto scams are the most-likely way Americans will be swindled out of their money with an average loss of $2,600 each, according to the report.

In March, President Joe Biden signed an executive order instructing regulatory agencies to create policies for digital assets to protect consumers and crackdown on using cryptocurrencies for illegal activity.

Sens. Kirsten Gillibrand, D-N.Y., and Cynthia Lummis, R-Wyo., introduced a bill that would define digital assets as either commodities or securities, allowing federal regulators to have more oversight.

“This bill is a comprehensive approach to how to create safety and soundness in this industry. How to create transparency, accountability and how to create consumer protections because of everything that has happened in the last several weeks,” Gillibrand said during a recent event held by The Washington Post.

The bill was created as cryptocurrencies’ values have plummeted in recent months, including the stablecoin Terra that imploded in May, losing investors tens of billions of dollars.

Cryptocurrencies have been an integral part of what many see as the new frontier of the internet called “Web3.” In this latest iteration of the internet, the decentralization of information stored on blockchain technology is seen as its biggest asset.

Bitcoin was the original use for blockchain, which has since grown into other uses.

“And what’s so interesting about this process, is the realization that we have a huge opportunity with Web3,” Gillibrand said. “If we get Web3 right, we can set innovation and democratization of finance and decentralization of finance on a path that can solve really big problems and make a huge difference for people around the globe.”

Cryptocurrency and Web3 enthusiasts are welcoming this regulation to aid consumers, which will likely lead to more people getting involved.

One of the biggest barriers to entry in the Web3 space is that it appears “too dark web,” said Madeline Lieber, the COO of the non-fungible token collection Crypto Chicks, during the same Zoom interview. She was referring to the most remote areas of the internet where illegal activity thrives.

In her work at Crypto Chicks, Lieber helps create educational opportunities about Web3, including blockchain technology, cryptocurrencies and the metaverse while also inviting them to the community’s metaverse events for exclusive merchandise. It helps show people the positive uses, she said.

She started at the NFT collection primarily because of her previous work at Facebook where she was working with women business leaders to create digital assets for their metaverse.

“I sat there and was like: we are all so screwed if these really influential, early adopters who are women in technology who have a deep understanding of the existing technological structures aren’t able to move over,” Lieber said.

Because if those women are skeptical, then “normies” who aren’t deeply versed in Web3 will be left out of that digital economy, she said.

Crypto Chick’s CEO Elissa Maercklein agreed.

“Having seen this bill and read through it, it’s pretty friendly to people building crypto in the right way,” Maercklein said in a Zoom interview. “And I think there is a pretty deep understanding across the whole [crypto] community that there are a lot of people who have gotten away with some not so great things and this will help introduce those guardrails for those people who are really building a positive change.”  

Fadirepo, who formerly worked in the Office of Inspector General for the Board of Governors of the Federal Reserve System, agrees there is a need for consumer protections at the federal and state levels. And they are moving in the right direction, she said, pointing out California is currently asking people about how they want to see these protections enacted. 

“The other part of consumer protection is consumer education. There’s a lot of fuzziness and sometimes it’s hard to remember only a small percentage of the world is crypto-fluent,” Fadirepo said. “And most people are browsing pieces on the internet and don’t have a deep understanding, so I think consumer education and consumer protections go hand-in-hand.”

In general, the same principles for traditional investing still apply to crypto: Make sure you have a diversified portfolio, Fadirepo said.

Madeline can be reached at [email protected] and @MadelineHughes