Offshoring of crypto hurts the financial system, the position of the United States
Coinbase founder and CEO Brian Armstrong attends Consensus 2019 at the Hilton Midtown on May 15, 2019 in New York City.
Steven Ferdman | Getty Images
The traditional financial system has served us well for centuries, but it is starting to show its age. Like all systems before it, the day has come when technological advances provide the opportunity to make it faster, more efficient and easier. From cable to streaming, cell phones to smartphones, and email to email, advances in technology have updated nearly every industry we interact with in an increasingly connected online world. Except for one.
While you may be able to bank online, the way the traditional financial system works behind the scenes has remained largely unchanged for at least 40 years. And the American people are starting to feel it. Nearly seven in ten Americans believe the financial system needs major changes or a complete overhaul, according to the latest research from Morning Consult. That’s where crypto and the technology that underpins it, the blockchain, come in. Crypto is a faster, more private, efficient, cheaper and user-controlled financial system. It is not a replacement for the traditional economic system, it is an update. An update that has the potential to increase global financial freedom and empower millions of previously unbanked people around the world.
While the consumer benefits that crypto can bring to the financial system are countless, it is also important to recognize the geopolitical benefits. The United States has long been a leader in global economic and political affairs, but its dominance is being challenged by other global superpowers. China, for example, has made significant progress in digital currencies and has already launched its own digital yuan. In addition, the UK, Japan and the EU have all made significant progress, with the EU most recently introducing MiCA which is intended to plug gaps in existing EU financial services legislation by establishing a harmonized set of rules for crypto-assets and related activities and services.
By embracing crypto and other forms of digital finance, the United States can not only update its financial system, but also strengthen its status as a geopolitical powerhouse. The dollar has enjoyed being the world’s global reserve currency for decades, but it has never been under more pressure. Imagine a world where the US issues its own USD stablecoin on the blockchain. Not only would this provide access to the dollar to millions of previously unbanked and underbanked people, but it would also be the de facto digital currency for remittances and international currency transfers ensuring that the dollar remains the global reserve currency both on and off the chain. We have recently seen this in effect in Ukraine, where the United Nations Refugee Agency (UNHCR) has used USDC to get aid into the hands of those affected by the regional conflict.
America is at a once-in-a-generation turning point: we have the option of being the leader in the digital currency space and reaping the benefits this leadership brings, or we can cede our leadership role to geopolitical adversaries eager to take the mantle as the 21st century global heavyweights. As other countries implement cryptocurrency regulations and guidelines, the United States risks falling behind both technologically and politically.
I chose to build Coinbase in the US because I believe that America should be at the forefront as the architecture of the internet evolves into the next generation of the financial system. Coinbase has been advocating for a clear regulatory framework for crypto for more than a decade. But while we see progress in other jurisdictions, the US seems more focused on turf battles between regulators. No other country in the world has spent so much time and energy trying to convince its citizens that crypto-assets are securities. The US is missing the forest for the trees.
To see the impact of sending innovation offshore, we need only go to the middle of 2020. The US semiconductor industry was once at the forefront of innovation, with companies such as Intel and IBM leading the way in the development of new technologies. In the 1980s and 1990s, however, a combination of factors led to a shift in the industry, with semiconductor production increasingly moving offshore. Today, we are suffering the consequences – chip shortages have affected our entire economy – from the automotive industry, to healthcare to the supply chain. It is critical that we learn these lessons and keep innovation ashore.
The US government needs to take a more proactive approach to cryptocurrency and provide a clear regulatory framework for the industry, one with forward-looking guidelines that recognize the many unique and innovative aspects of blockchain technologies. This will create a more stable and secure environment for cryptocurrency to thrive and will help attract more investment and talent to the United States.
Companies like Coinbase are leading the way in fostering innovation and creating a secure environment for cryptocurrency to thrive, but we can’t do it alone. It is time for the United States to take action and work with its US-based crypto companies, not against them, to build a comprehensive regulatory framework that protects users, empowers innovators, and provides the American people with a financial system built for the 21st century.
Brian Armstrong is the CEO and co-founder of Coinbase.
Subscribe to CNBC on YouTube.
