Even casual viewers of US cable news are familiar with ads that feature actor William Devane – usually golf or horse riding – motivating them to invest in precious metals. Financial educator Robert Kiyosaki, creator of the “Rich Dad, Poor Dad” book series, has recently joined Devane in this endeavor.
The prevalence of these ads should be no surprise. In these volatile times, the Donald Trump administration has spent big and printed money. (The United States is not alone in borrowing and printing its way out of the Covid-19 pandemic.) There is no reason to expect a different behavior under President-elect Joe Biden.
Not surprisingly, alternative stores of value are thriving. Days ago, the Bitcoin cryptocurrency reached another peak ever, just as it became clear that the Biden-Harris administration was a fait accompli.
But while Bitcoin is the best-known digital currency, only a small part of a technological shift could meet our demand for safer, cheaper and faster ways of doing business in times of crisis and disruption.
Bitcoin’s basic technology, blockchain – a type of secure, shared transaction ledger among networked computers – has applications ranging from supply chain management to securing international payments. It could be a “game changer for the global economy,” according to JPMorgan Chase.
In fact, that investment giant started using its own JPM Coin in October to move investor money across its global financial platforms. Gartner’s consulting firm predicts that the business value-added from blockchain will blow past US $ 3 trillion by the end of this new decade.
The industry powering all this change, however, is finding it more difficult to stay in the United States because of Washington’s dysfunction. Silicon Valley startups invest billions in R&D, but there is no clear set of rules to help them bring products to market. Congress has sanctioned for writing a regulatory framework, and the country’s oversight agencies – as usual – are fighting over turf.
Experts say this “regulatory chaos” is hampering American innovation while other market centers like Britain and Singapore have quickly updated their rules to lure American blockchain developers away, while Beijing is scrambling to establish technology supremacy.
Roslyn Layton of the American Enterprise Institute sent an outspoken message to the US Parliament this month: Regulators, without guidance, are killing innovation. China could soon overtake us, he warned, unless Parliament held Biden to its promises of “technocratic competence” and stiff economic competition with China.
At least eight regulatory agencies are fighting over who can play U.S. crypto cops. Without any reference, regulators “copy-paste their bureaucracy onto anything that moves,” Layton observed. The Securities and Exchange Commission (SEC) applies the ancient 1930s rules that “never imagined blockchain solutions,” comparing all digital assets with securities no matter how they are designed or used.
Critics like Layton point to China’s new “digital yuan” – the country’s only legal cryptocurrency – as an annoying sign that the Chinese are winning on the US. The People’s Bank of China formally announced in October and has attracted 2 million Chinese to bid for the official ticket worth US $ 10 million, said Wayne Brough of the Defense Innovation Institute.
Big American companies including Starbucks, McDonald’s and Subway have embraced China’s new currency. France, Sweden, Switzerland and Japan are developing their own central bank digital currencies. Brough claims that through inaction the United States will “blow our way out of winning a race we were born to win.”
George Nethercutt, a former Republican congressman from Washington state, warned in The Hill that Washington’s negligence could create “an unnecessary train wreck.” China and Singapore are paving the way for their own blockchain industries, he wrote, “while the United States is struggling with a shortage of coins, leverage-checking complexities, and a lack of clear understanding on Capitol Hill about what cryptocurrency is even. ”
This is “embarrassing” for the most technologically advanced country in the world, he said.
Layton and Nethercutt point a finger at outgoing SEC chairman Jay Clayton, who, Layton said, made “a deliberate lack of regulatory clarity” the “cornerstone of his crypto policy approach.” Clayton showed “no understanding of the need for a regulatory framework” with his “notorious protected approach” to blockchain solutions, added Nethercutt, “significantly limiting American innovators.”
Clayton empowered the SEC by treating any digital asset as “security,” justifying enforcement action with the 194 Supreme Court ruling. SEC Clayton reduced the boom on “utility tokens” – a core feature of business software using blockchain – according to Layton , even if they were not “like investment contracts.”
This treatment extended to the utility ticket of XRP, the third-highest-value cryptocurrency in the world, used by American developers like Ripple and R3 to power the type of payment systems that JPMorgan has already introduced. Only by placing this token under a “persistently confusing enforcement threat,” the SEC hurt all developers on the XRP ledger. Clayton retained the power of his own agency “but gradually eroded US leadership as the best place to do business.”
It remains to be seen whether Biden’s view of Clayton’s view of unlimited power over digital assets, or whether Biden’s promise of bipartisan cooperation will extend to end the regulatory chaos.
Republicans have spent the last four years breaking regulations and refining in the administrative state and should understand that China cannot be allowed to win the crypto race.
Senate Democrats on the Banking Committee like Elizabeth Warren and Sherrod Brown should remember that their party president, Bill Clinton, enacted the regulatory framework for e-commerce in 1997. It created millions of American businesses, reaching tens of millions of customers, and spawning a long list of occupations that had never existed before.
Coming together with SEC vet Biden choosing a crypto policy and moving the country closer to a clear set of rules would be a win-win for both sides and the US economy. Our competitors abroad can never beat us on innovation – unless we keep shooting ourselves in the foot.
This article previously appeared in RealClearPolicy. Read the original here.