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It has been almost two months since President Joe Biden took office and since Bitcoin believers, his arrival brought modest good news.
Most notably, the Biden administration appears to have called off a campaign by the former Treasury secretary to impose onerous new rules on the crypto industry, a campaign that many saw as an anti-crypto vendetta. Meanwhile, Biden’s choice to lead the SEC is a former MIT blockchain professor who may not be pursuing pro-crypto policies, but clearly understands Bitcoin deeply.
This is a departure from the Trump administration, whose members, including the former president himself, have often expressed outright hostility to Bitcoin and crypto. But the United States is still a long way from developing policies to encourage crypto innovation. The law here is a mess as different agencies pursue competing, if not contradictory, regulations. And Congress, which passed laws in the 1990s to help the country become the world leader in internet technology, seems content to let other countries take the lead in crypto.
So what is going on? Why haven’t US lawmakers and regulators embraced one of the most transformative technologies of this decade? The short answer is “it’s complicated”.
I recently spoke with a longtime Justice Department attorney who has pursued high profile money laundering cases, including those involving Bitcoin. He admitted that US crypto policy was dysfunctional, with parts of the federal government trying to encourage Bitcoin-like innovation while others trying to shut it down.
The lawyer attributed this dysfunction to the disproportionate role of national security agencies in shaping the US vision for crypto. Members of these agencies looked at crypto and Bitcoin entirely through the prism of the country’s war on terrorist financing. He noted that since the passage of the Patriot Act in 2004, the federal government has turned the US dollar into a “strategic weapon” to advance foreign policy objectives.
Ironically, this move may have accelerated the rise of competing currencies against the dollar, including Bitcoin and other cryptocurrencies. As the New York Times noted this week, the “militarization of the dollar” angered Europe and led governments there to explore financial tools that would make them less dependent on the US currency.
China, meanwhile, has taken the lead by issuing a crypto-version of the yuan through its central bank. The country’s new digital currency is in part an extension of its sprawling surveillance state, allowing the Communist Party to better track how people are spending their money. But as the former DOJ lawyer told me, it’s also a new form of soft power for Beijing, which wants to use the convenience of blockchain-based money to involve other countries in trade deals. who do not use the dollar.
All of this means that the failure of the United States to develop a coherent crypto policy could undermine the country’s geopolitical influence sooner or later.
It is not too late, of course, for the United States to win the crypto era like it did at the start of the Internet era.
Many of the world’s largest crypto companies are based in Silicon Valley, and America’s relative freedom from China’s totalitarian regime will ensure the dollar doesn’t disappear anytime soon. And paradoxically, Bitcoin has also inadvertently strengthened the US dollar as Satoshi Nakamoto’s currency is not particularly convenient for day-to-day transactions. As the lawyer notes, “even North Korean hackers who steal Bitcoin cash it in dollars.”
Still, the Biden administration would do better to start making crypto politics a priority, treating crypto as part of the innovation race, rather than as a threat to be quelled. Current assumptions about national currencies are changing rapidly, and the United States must prepare for an era when crypto is the dominant form of currency.
As for the DOJ lawyer, he left the government a few years ago. He now advises a crypto startup.
It is Roberts on Crypto, a weekend column written by Decrypt editor Daniel Roberts or Decrypt editor Jeff John Roberts. Sign up for the Decrypt email newsletter to receive it later in your inbox. And read last weekend’s column: Why the NBA is designed for NFT Craze.
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