It has been almost two months since President Joe Biden took office and for Bitcoin believers, his arrival brought modest good news.
Most importantly, the Biden administration has apparently launched a campaign by the former treasury secretary to impose onerous new rules on the crypto industry. Meanwhile, Biden’s choice is to lead the SEC, a former MIT blockchain professor who may not follow a pro-crypto policy but clearly understands Bitcoin.
This is a departure from the Trump administration, whose members, including the former president himself, have often expressed direct hostility to Bitcoin and crypto. But the US is still far from developing policies to encourage crypto-innovation. The law here is a mess because different agencies pursue competitive or even conflicting regulations. And Congress, which enacted laws in the 1990s to help the country lead the world in the field of Internet technology, seems pleased that other countries can take the lead when it comes to crypto.
So, what’s going on? Why have US lawmakers and regulators failed to adopt one of the most transformative technologies of this decade? The short answer is “it’s complicated.”
I recently spoke with a longtime Attorney General who has been pursuing high-profile money laundering cases, including cases involving Bitcoin. He conceded that US cryptocurrency policy was dysfunctional, with parts of the federal government trying to encourage Bitcoin-style innovation, while other parts were trying to turn it off.
The lawyer attributed this dysfunction to the extraordinary role that national security agencies had in shaping the U.S. view of crypto. People in these agencies have completely taken Crypto and Bitcoin under the microscope of the country’s war on terrorist financing. He noted that since the adoption of the Patriot Act in 2004, the Feds have turned the US dollar into a ‘strategic weapon’ to achieve foreign policy objectives.
Ironically, this decision could have accelerated the rise of competing currencies to the dollar, including Bitcoin and other cryptocurrencies. Like the New York Times noted this week, the ‘arming of the dollar’ angered Europe and prompted governments to look to financial instruments that would make them less dependent on the US currency.
Meanwhile, China is taking the lead in issuing a crypto version of the yuan through its central bank. The country’s new digital currency is in part an extension of its vast surveillance state, enabling the Communist Party to better track how people spend money. But as the former DOJ lawyer told me, this is also a new form of soft power for Beijing, which wants to use the convenience of blockchain-based money to include other countries in trade transactions that do not use the dollar.
All this means that the failure of the US to develop a coherent crypto-policy sooner rather than later could undermine the country’s geopolitical influence.
Of course, it is not too late for the US to win the crypto era as in the early internet era.
Many of the world’s leading crypto companies are based in Silicon Valley, and America’s relative freedom compared to China’s totalitarian regime will ensure that the dollar does not disappear any time soon. And paradoxically, Bitcoin also accidentally strengthened the US dollar, as Satoshi Nakamoto’s currency is not particularly practical for daily transactions. As the lawyer notes, “even North Korean hackers who steal Bitcoin make it out in dollars.”
Yet the Biden administration needed to start better to make crypto policy a priority, and to treat crypto as part of the race for innovation, rather than being a threat to snoop. Current assumptions about national currencies are shifting rapidly, and the US needs to be prepared for an era for when crypto is the dominant form of money.
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’s editor – in – chief, Daniel Roberts, or Decrypt’s executive editor, John John Roberts. Subscribe to the Decrypt email newsletter to receive it in your mailbox in the future. And read last weekend’s column: Why the NBA Is Built for the NFT Craze.