The last twelve months have proved to be a banner year for blockchain and cryptocurrency. Technology has become a household name and the subject of breathtaking news coverage. The formation of capital through the so-called first coins (ICO) reached $ 16 billion, exceeding the traditional risk capital. A rogue nation-state has created its own cryptocurrency to avoid sanctions and the price of Bitcoin has risen by almost 1,000 percent, probably becoming the biggest financial bubble in the history of human civilization.
This explosion of Cambrian activity is an indication that these inventions, although still early and sparkling, have far-reaching implications for the global financial system and the position of the United States as an economic powerhouse and global innovation .
On the national security front, the actors controlling these technologies will have a solid and flexible leverage available in a future in which conflicts are fought in cyberspace and through the use of economic technology.
From an international monetary perspective, the emergence of cryptocurrency as a globally functioning measure of value will have broad implications for the Bretton Woods system, where the status of the dollar as the primary reserve currency has guaranteed the United States the lack of geopolitical leverage. Institutions and global financial organizations such as the International Monetary Fund (IMF), the G20, the Bank for International Settlements (BIS) and the Organization for Economic Cooperation and Development are closely following these trends and are deliberately moving to understand its consequences.
Competitive nations are also keenly monitoring these developments, observing an enhanced role for themselves on the global stage and investing in their own proprietary versions of the technology. China, for example, is investing billions of dollars in the development of blockchain and leads the world in depositing blockchain patents. Russia has been quite honest in believing that the blockchain is a means to dethrone the United States from its financial and economic stand.
What is certain is that a new digital monetary era is at the horizon; what is uncertain is what role America will play in this system.
While the United States successfully employed a magic formula of light touch regulation and targeted government support to stimulate Internet growth two decades ago, this time adopted a less visionary approach. Instead, wrong ideas, misunderstandings and lack of regulatory clarity and applicability are inadvertently stifling innovation and forcing local entrepreneurs to go elsewhere to build and test their products. These mistakes could lead the United States to effectively cede leadership in this area to other nations.
To date, the US official position on blockchain and cryptocurrencies has largely focused on money laundering concerns, although the documented use of Bitcoin by bad actors – while a threat – it's actually quite rare. In January 2018, the Foundation for the Defense of Democracies found that only 0.61% of all transactions on the Bitcoin blockchain from 2013 to 2016 came from an illicit entity. These concerns often also overlook the fact that blockchains are not inherently anonymous and can be programmed with anti-money laundering (AML) and must know the client's dispositions, which many good actors are actively trying to do.
Even the application of the normative taxonomy of the Industrial Era to the new methods of capital formation powered by blockchain has been a recurring theme. This reached a feverish level in June, when an official of the Securities and Exchange Commission noted that ether, the native cryptocurrency of the Ethereum blockchain, is not a security in its current state, but does not offer concrete guides to projects. similar that try to follow the example.
These comments have overshadowed the role that cryptographic tokens will soon play in economic activity and the true potential these systems offer, particularly in combination with other emerging technologies such as artificial intelligence, Internet of objects and automation of robotic processes. They also take for granted the question of the status of the United States as a leader in innovation, and they fail to consider the steps they need to take to drive the next technological revolution in the same way that it led the last.
The crux of the problem is a regulatory problem that applies yesterday's rules to the economy of tomorrow. Numerous federal agencies have claimed jurisdiction over cryptocurrencies and have issued confusing and even contradictory regulatory guidelines, banning innovators with compliance costs and legal risk. States individually have their own different rules and regulations that regulate securities and money activities, further complicating matters.
Such labyrinthine and non-malleable structures are a responsibility in a rapidly evolving state of play. In a 2016 essay on the fourth industrial revolution, Klaus Schwab, founder and executive president of the World Economic Forum, said that the ability of government systems to be agile and adapt to new technologies that redistribute and decentralize power will ultimately determine the their survival
At present, the United States is playing from behind in this emerging Emerging Era, where business models and governance structures will be global, decentralized and mediated by technologies like blockchain. There will be far-reaching implications if it is not able to regain a leadership position, since technological and financial hegemony is at stake this time. Jobs, talent, capital formation and economic opportunities could be lost in the short term; medium-term technological dominance; and a gradual acceleration of the status of the dollar as a long-term global reserve currency. This development would have unpredictable effects both in the United States and in global economies.