If the United States wants to lead in cryptocurrency, artificial intelligence, and other cutting-edge technology industries, it needs to establish clear rules that recognize the value these innovations can bring to the economy, especially by restoring the competitiveness of the technology industry. Unfortunately, neither presidential candidate seems to realize this.
CAMBRIDGE — The cryptocurrency industry is going all-in on this November’s U.S. presidential election, pouring hundreds of millions of dollars into backing candidates who might push for sensible regulation. However, despite such huge investment - the industry has become the most funded sector this cycle - it remains unclear how both candidates will approach the issue and prioritize builders over speculators.
Casual observers may have heard that Republican candidate and former President Trump has come out in support of this cause. At a recent Bitcoin conference, he promised to make the United States the "global cryptocurrency capital," establish a strategic reserve of Bitcoin, and embrace the application of stablecoins. The audience responded enthusiastically. However, Trump’s aggressive propaganda underscores the biggest challenge facing the industry: For too long, those who want to use the technology for financial speculation have dominated the policy debate, while those who really want to use it to build something substantive have not Be marginalized.
Democratic candidate Vice President Harris Harris has been largely silent on the topic, but now she has a chance to propose more thoughtful, progressive policies toward financial innovation. Cryptocurrency policy, like AI policy, is fundamentally about innovation and national competitiveness. For the United States to become a leader in this strategic industry, the next administration must first replace the current set of financial regulators hostile to cryptocurrencies, especially Securities and Exchange Commission Chairman Gary Gensler, who has resisted engaging with the industry. meaningful dialogue.
But simply appointing regulators more sympathetic to the quick-profit mentality won’t improve things either. Cryptocurrency’s greatest advantage—its ability to incentivize the construction of open networks—is also its greatest liability. Like the railroad mania of the 19th century, cryptocurrencies have enabled the construction of valuable new infrastructure, but they have also been used by irresponsible people to perpetrate scams and frauds - SBF (founder of FTX) is a prime example. He knows how to play the game within the existing imperfect regulatory framework.
Those businesses that engage in mere speculation or even outright fraud have the most to gain from the current regulatory chaos. To make matters worse, many who proactively advocate for regulation or attempt to cooperate with regulators are met with enforcement actions, resulting in them losing access to essential banking services.
Regulators often lack incentives to adapt existing rules to accommodate new technologies, while existing stakeholders often give them reasons to maintain the status quo. In the cryptocurrency industry, accountability for criminal behavior comes too late or not at all, resulting in consumer losses. In the absence of clear regulation, market participants with established businesses or in need of banking services are often reluctant to explore the technology, regardless of its potential. The result is a system that encourages recklessness and fraud, while innovators who want to improve payment systems, reform the financial industry, protect data privacy, or solve the market monopoly problems of tech giants are being stymied.
Thoughtful cryptocurrency regulation will require more than Trump’s pandering, and this issue goes far beyond cryptocurrencies. If the United States is to maintain its leadership in artificial intelligence, defense, and other industries, it needs to develop rules that recognize the tremendous value these innovation-intensive industries bring to the overall economy, especially by restoring competition. This is a complex task, and success relies on more than just pleasing Bitcoin’s extreme supporters or simply allowing stablecoins to exist.
Considering Trump’s proposal to have the U.S. government hold Bitcoin as a strategic asset, while this would clearly be positive for Bitcoin’s price, it’s impossible to see how it would serve the national interest. Instead, the federal government should treat blockchain-based networks as critical infrastructure, similar to 5G.
Nor should governments blindly support domestic Bitcoin mining without encouraging ways to harness renewable and trapped energy, or support increasingly fragile power grids (as seen in Texas). Regulation should consider how Bitcoin mining and chip manufacturing contribute to national security while ensuring minimal environmental impact.
During his speech in Nashville, Trump accused the Biden administration of targeting cryptocurrency companies' relationships with banks. But the real problem is a regulatory and supervisory environment that makes it difficult for banks to safely participate in the cryptocurrency business. Many banks recognize that digital payments and assets will play an important role in the financial system, but they are hampered by unreasonable regulations like Staff Accounting Bulletin No. 121 (SAB 121), which imposes punitive penalties on businesses. accounting standards, making it impossible to discuss exceptions privately with SEC staff.
Trump also pledged support for stablecoins to bolster the dollar’s dominance. But again, this issue is more complicated than it seems. In order to prevent the market from being too concentrated like the credit card industry, the United States needs to promote a competitive environment for stablecoin issuance. The dominant application should not be dollarization, as this goal could weaken capital controls, destabilize emerging economies and undermine the effectiveness of sanctions. Instead, legislation should ensure that stablecoins serve as a secure means of payment, supporting instant global transactions.
Achieving this vision requires a strong compliance structure. Current stablecoin issuers either don’t know or don’t want to know if their digital dollars are being held by sanctioned countries or criminals, but this dangerous blind spot is a major barrier to mainstream adoption. Cryptocurrency entrepreneurs need to develop innovative solutions to identity and compliance challenges, but progress in these industries has been very limited to date. New regulations will need to strengthen incentives for the private sector to do the hard work.
Ultimately, the Legislature in Washington must come together and create new rules rather than trying to shoehorn cryptocurrency use cases into laws that are nearly a century old. At the same time, the industry itself also needs to solve many problems that traditional financial services and cryptocurrency leaders have long ignored. A thoughtful cryptocurrency policy should prioritize builders over speculators. The potential, just as it was in the early days of the Internet, is to reinvigorate industries that have long lacked competition.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Foresight News"
Original article by Christian Catalini, Jai Massari, Rebecca Rettig, The Jordan Times
