People with less money or who don’t have bank accounts are more likely to use cryptocurrency as a way to pay.
Who uses cryptocurrency, and why do they? A recent report from the Federal Reserve says that people who don’t have access to traditional banking services may be able to use digital currencies like bitcoin. Even though crypto schemes and big busts get a lot of attention, the unbanked can use peer-to-peer digital money to make transactions.
The Survey of Household Economics and Decisionmaking is an annual report from the Federal Reserve. Since 2013, it has been surveying American families to learn more about their finances, jobs, and how ready they are for unexpected costs.
The report came out in May and was called “Economic Well-Being of U.S. Households in 2021.” In their survey, the Federal Reserve is asking about cryptocurrencies for the first time. Based on the results of a survey of 11,874 people of different ages, incomes, ethnicities, and levels of education, it seems that how people use digital currency may depend a lot on their own situations.
On page 46 of the report, you can find the most up-to-date information about how cryptocurrency is used. First of all, it shows that just over 1,400 people, or 12%, have held or used cryptocurrency at some point in the past year. If that’s true for everyone in the US, it means that almost 40 million people used cryptocurrency at some point in 2017.
This is in line with other estimates of how many people in the United States use cryptocurrency. For example, the Pew Research Center estimated in 2021 that about 16 percent of Americans, or 53 million people, had ever bought or held cryptocurrency. Since the Fed report only looked at the previous year, the fact
that these two estimates are so close suggests that Americans may be getting more comfortable with cryptocurrency.
The new report from the Federal Reserve is helpful because it tells the difference between people who bought cryptocurrency as an investment (to hold and trade for profit) and people who bought cryptocurrency to use as digital cash in their daily lives. It further divides these subsets by income and banking status.
The survey found that most of the people who used cryptocurrencies in 2021 did so as an investment. Eleven percent of the people who answered said they had done this, and another 3% said they had used it to buy something. Only 2% of the people who answered said they had bought something with cryptocurrency, and only 1% said they had sent money to a friend or family member using the same method. It’s important to keep in mind that some of these numbers are the same, since some people who used bitcoin to buy things also used it to invest.
It doesn’t seem like much, 1%-2%. But if you extrapolate to the whole US population, you get a large group of people. If the survey is accurate, more than six million Americans may have used cryptocurrency as a way to pay in 2018.
It’s interesting to see that people with lower incomes are more likely to do their transactions with cryptocurrencies. Sixty percent of people who used cryptocurrency made less than $50,000 a year.
Also, people who used cryptocurrencies were more likely not to have a bank account than those who didn’t. Only 6% of people who don’t use cryptocurrencies for transactions don’t have a bank account, while 27% of people who don’t use cryptocurrencies for transactions don’t have credit cards, compared to 17% of people who don’t.
Brian Kemp and Stacey Abrams When it comes to the question of growing the government, both of Georgia’s candidates for governor support growth. The types of people who have invested in cryptocurrency can also tell us a lot. Compared to transactional cryptocurrency users (13%, 27%, and 29%) and people who don’t use cryptocurrency, this group was less likely to not have a bank account (1%), no credit cards (7%), or no retirement savings (11%). (6%, 17%, and 27% of the whole). People who think of cryptocurrency as a way to
invest are likely to be better off financially and know more about the stock market than people who don’t. Almost half of these people had incomes of $100,000 or more per year.
To give you an idea of how big that number is, the FDIC says that only 5.4% of American households do not have a bank account. Depending on how big the average household is, there could be between 12 and 18 million people in the United States. About six million people becoming familiar with cryptocurrency transactions each year could help many families find an alternative way to get money.
Don’t get too excited just yet. If someone says they’ve only ever paid for something with Dogecoin once, that doesn’t mean they can’t use traditional banking services. Most people who used cryptocurrency also had regular bank accounts. Digital currencies are not used by many people who do not have access to traditional financial services. To make things like low-cost Bitcoin payments an everyday option, a lot of work needs to be done to get more people to use cryptocurrencies and make signing up for them easier.
But the results of this survey suggest that people who often deal in cryptocurrencies are less likely to have access to traditional banking services. Cryptocurrency users with more money to spend, on the other hand, are more likely to see it as an asset or an investment.
What would happen if the government did something, if anything? First of all, the survey gives us a more complete picture of people who use cryptocurrency. Cryptocurrency’s critics say that it is nothing but a fancy way to destroy money.
This study shows that there are a lot of different reasons why people use crypto. The first two groups are made up of people who put most of their money into cryptocurrencies. This doesn’t mean that they are good investors, but it does show that they know more about money than the average person.
People who do most of their financial transactions with cryptocurrencies are statistically more likely to be low-income and have less access to financial services than either people who invest in cryptocurrencies or people who don’t use cryptocurrencies.
Policymakers should be aware of how their plans to help (or punish) one of these groups could hurt (or encourage) another.
It should be interesting to see how people’s answers to these questions about cryptocurrency change over time. The Federal Reserve should try to improve how they do things in the future. It would be helpful to make a distinction between “trading,” or short-term price speculation, and “long-term investments,” or people who hold cryptocurrencies like bitcoin the same way they hold commodities like gold. This would help people understand the differences between high-risk financial strategies like the “crypto casino” and low-time preference investments like “hodling.”
In the 2023 report, which will look at how people used cryptocurrencies in 2022, the year inflation became a household word, it will be interesting to see how people’s views on cryptocurrencies change. I think more people will start to see bitcoin and other cryptocurrencies as safe haven assets like gold, but we’ll have to see.
Any way you look at it, we could always use more hard data on how people are actually using cryptocurrencies. Because of this, we can tell the truth from the usual exaggerations of supporters and opponents. Let’s hope that in the future, more financial institutions will make decisions about cryptocurrencies based on solid data.
