- Decentralized finance has the potential to create an equitable ecosystem and increase access to financial services for underserved communities.
- California, with its comprehensive policy framework for Web3 technology, has become a leading hub for crypto innovation.
- Education is an important part of this story, and City3 is empowering underserved communities in the state by providing crypto education, community-directed funding measures, and affordable payment systems.
- Read more examples of Crypto in Action.
California has been a home for innovation in the US. It is also becoming a hub for leveraging crypto’s benefits for historically underserved communities – especially for minorities, migrants, and small businesses who may not be the priority for legacy systems. City3 is an Oakland-based initiative that aims to empower underserved communities in the crypto industry. Founded by Darrell Jones III, the organization seeks to provide community members with crypto education, community directed funding measures, and opportunities for affordable payments systems.
Underserved communities face a multitude of challenges for feasible access to traditional financial systems. These challenges range from inaccessibility to banking services and credit options, to high transaction costs.
Government agencies have flagged discriminatory practices in the banking industry, limiting underserved communities from accessing capital, and building their wealth. These individuals may often face limited financial options for savings, credit, and investment.
These practices can include redlining, in which neighborhoods are denied banking services and loans on the basis of their socioeconomic conditions and racial background. Discrimination also occurs in lending practices, where minorities may often face higher interest rates, or simply be denied loans.
Redlining and loan denial are among the many practices that work to bolster socioeconomic disparity and limit opportunities for upward mobility. These barriers come to have disproportionate impacts on minorities and small businesses, inhibiting their ability to participate in the US economy.
One of the promises of crypto is the potential to challenge these discriminatory practices in the financial sector.
Crypto offers a decentralized alternative to the current financial model, one that operates independently of institutions. By leveraging the transparency created by the blockchain infrastructure, it can foster financial inclusion and eradicate discriminatory practices. The decentralized framework allows for those from underserved communities to circumvent the barriers and biases inflicted by the banking sector.
Crypto Adoption in California
In May 2022, California Governor Gavin Newsom signed Executive Order N-9-22. This order is designed to bridge the gap between industry and blockchain technology by fostering a clear regulatory environment for businesses and investors within the Web3 space.
The executive order seeks to balance opportunity costs to consumers, while integrating the core values of California – such as inclusion and equity – within the policy structure.
The order also focuses on addressing the environmental implications of mining such as energy consumption, and the risks of illicit digital transactions. Overall, it seeks to establish the state as a leader in formulating the operation of emerging technologies leveraged for the public good.
California’s state legislature is also working on comprehensive legislation to establish crypto regulations. More specifically, this legislation aims to establish a licensing regime for digital financial asset business activity in California by 2025.
Featuring City3 Empowering Oakland’s Underserved Communities
Education plays a significant role in bridging the digital divide. As technology rapidly advances, it is important to ensure that people have the knowledge to make informed decisions and leverage technological innovations effectively.
City3 has held various onboarding workshops that help address the financial literacy gap in crypto. By being well-informed, individuals can confidently engage in crypto transactions, protect their assets from scams. Topics include how fintech platforms work, what digital wallets are, security measures, and the risks and opportunities associated with crypto.
City3 also held a community – led government round, a project between the Ethereum Foundation and the Oakland Fund for Public Innovation, “which is Oakland’s citywide formal innovation arm.” Jones says that Oakland Fund founded seven local nonprofits to serve as stand-ins as “public good causes” for community members to vote and allocate about $15,000 of funds. “This was an attempt to demonstrate how citywide participatory budgeting could work powered by the blockchain,” said Jones.
City3 has also provided NFTs – like digital merch – for local events, a part of NFT Oakland, which is a 1000 person event throughout Oakland. “NFT Oakland is one of the most diverse crypto events I’ve ever been a part of where rooms are full of different educational and onboarding workshops and activities for folks,” said Jones.
Last year, City3 had nearly 3,000 people subscribed to the mailing list. “We onboarded 1,100 newcomers – people with noncustodial browser enabled web three wallets” with 60% representation by people of color, said Jones. Hence, these initiatives encourage more trust and participation in the space, fostering gradual crypto adoption within underserved communities.
Community-directed funding allows community members to allocate funds relative to their needs. This model is decentralized and empowers individuals to make decisions about how financial resources are distributed in their local communities.
Within the context of crypto, community-directed funding can operate via decentralized autonomous organizations (DAOs), or community-driven initiatives. These platforms allow community members to discuss and decide funding proposals.
For instance, the Brussels DAO is building The Citizen Wallet, which will soon have a collaboration with City3’s Oak Currency. Individuals are able to send and receive any currency on any compatible blockchain on the wallet. The QR code for payments visible on the wallet, contains the details of the blockchain to use for any given token.
Decentralized finance has the potential to democratize access to financial services by eliminating intermediaries, and biases. Such platforms help facilitate transactions, and remove high fees. It offers individuals who have been excluded from traditional finance the opportunity to engage in borrowing, lending, and investing.
Ultimately, City3 plans to enable community members to support local projects through this decentralized funding protocol and collaboration with The Citizen Wallet.
Affordable Payments for Local Businesses
Within the current legacy payment system, small businesses face high transaction fees, slow processing times, and limited payment options. These fees pose financial burdens on small businesses, which hinder their growth. Slow processing times delay funds, disrupt cash flow and impede on business operations. Moreover, the limited payment options restrict customers’ payment choices and can result in lost sales opportunities.
City3 has taken initiative to implement affordable payment methods that cater to the needs of local businesses, fostering an environment where they can thrive.
In September 2023, City3 will launch Oak Currency as a Coinbase listing to counter the negative impacts left on underserved communities by legal payments systems. “Our mission is to build a community currency for thriving Oakland,” said Jones. Oak Currency will act as a community currency, allowing for the ease of transactions among businesses and individuals based in Oakland. The purpose is so that “we can keep value circulating locally, save small businesses on transaction fees, and support local causes from our community Treasury,” said Jones.
City3’s affordable and community-centric Oak Currency aims to support small businesses in Oakland by reducing transaction fees, improving transaction speed, and fostering a local economy.