Gerard Scimeca – Chairman, CASE
January 14, 2020
Before he became the world’s richest man, Jeff Bezos was sailing in a sea of red ink, racking up billions in losses to get Amazon off the ground. While the venture had all the appearances of a giant money pit for the better part of a decade, he and his investors bet big that e-commerce was the future when many of the world’s consumers considered engaging in online transactions to be a novelty, or even an unsafe risk.
Whatever one may think of Bezos and his online leviathan, a more expansive view suggests that Bezos’ fortunes were the digital equivalent of Henry Ford and his mass-produced automobile, each being first in line to fully capitalize on innovation that, in retrospect, appears to have been inevitable. But this is how digital innovation frequently works; what begins as unfamiliar and even confusing soon becomes so ingrained into our lives that we can’t remember what we did without it.
E-commerce didn’t just become a convenient new way to make and receive payments, but fundamentally transformed the economy by empowering consumers with an entirely new way to transact business in ways that provide far greater choice and convenience. Just consider the difference in how consumers today compared to 20 years ago plan their travel, buy a car, search for a job, or even purchase a home. With the explosive growth of new payment systems and mobile wallets, there is no reason to believe that the revolution in digital exchange within our economy is anywhere near complete. The question is: Will we be ready to take advantage of it?
Cryptocurrencies now sit in the spot occupied by e-commerce 10 to 15 years ago. Still seen by many as a confusing niche industry, that view is changing rapidly. Use is growing, the demand for blockchain technologies that support it is exploding, and its potential to reshape and boost our economy is without clear limits. Today consumers, startups, established companies and online merchants and service providers can reach across oceans to find new markets and customers, converting and exchanging currency in seconds, at little or no cost. To those who may not have gotten the memo, this is the future of the world economy.
A recent study from Deutsche Bank notes that growing demand for digital currencies will supplant traditional flat currencies by 2030, a mere decade from now. Unfortunately, Washington seems content to allow this seismic shift to advance without preparation. Treasury Secretary Steven Mnuchin offered that the government doesn’t see a need for action on this front in the next five years, a stance that is as disappointing as it is short-sighted.
As it stands today, our government’s approach to cryptocurrency oversight resembles the Wild West, with disparate treatment across the agency spectrum. The IRS may tax it as income or property, the SEC may regulate it as a security, and the Commodities Future Trading Commission (CFTC) may view it as a commodity. This confusion is compounded by the lack of uniformity in the way various cryptocurrencies function. Security tokens, for example, are held as an investment, while utility (or gateway) tokens, are used as ordinary payments. Having an incoherent and arbitrary regulatory framework is just not acceptable with a transformative and vastly expanding technology heading to our doorstep.
A clear, consistent, light-touch regulatory framework from the Treasury Department that supports innovation and sets the stage for mass adoption of cryptocurrency and altcoins is vital to prevent U.S. consumers and businesses from losing out. Sitting still in the face of booming blockchain technology would be the equivalent of attempting to engage in e-commerce without an internet connection. Inaction is a mistake we cannot afford.
Aside from its economic potential, cryptocurrencies further help nullify the ongoing global manipulations of currency that perennially plague international trade. This levels the playing field for consumers and businesses seeking to expand beyond their borders while also forcing a more honest hand at the bargaining table from countries such as China who have profited handsomely from currency manipulation.
A clear regulatory framework is also necessary for the millions of Americans working in the gig economy, where people make ends meet by selling goods and services as freelancers. A 2018 study found that 35 percent of Americans performed some kind of freelance work, a number certain to grow in the years ahead. Clarifying and codifying crypto regulations will open up new markets to small-volume merchants and independent contractors and allow them to keep pace with their international counterparts, keeping our nation’s economy humming.
The rise of cryptocurrency and blockchain technology has made clear this is no mere novelty or niche industry, but the next major step in the evolution of our digital economy. It’s time Washington prepares for this inevitable future before it arrives.
