Racial Disparities in Cryptocurrency: A Decomposition Analysis

Abstract This study investigates racial and ethnic disparities in cryptocurrency (crypto) ownership using data from the 2021 Survey of Household Economics and Decision-Making (SHED). While prior research has explored general determinants of crypto market participation, such as risk tolerance, financial literacy, and investment experience, this study specifically focuses on how these factors differ across racial groups. Using logistic regression and Fairlie decomposition analysis, we find that Black respondents are significantly more likely to invest in crypto compared to White respondents. Key contributors to this disparity include age, financial literacy, risk tolerance, and stock ownership. Notably, while some factors, such as younger age and higher risk tolerance, narrow the participation gap, others, including differences in total savings and stock ownership, widen it. These findings highlight the need for targeted financial education and inclusive investment policies to promote equitable participation in emerging digital financial markets. Implications for financial literacy, consumer protection, and broader economic policy are discussed.