Gerard Scimeca – Chairman, CASE
November 18th, 2020
There is no denying that all of us are now witnessing a global economy under massive disruption and an uncertain future. If the past is any indicator, this is typically the time when American innovation comes to the rescue and fuels a rebirth that reshapes everyday economic life. But we’ve been squandering this role and wasting precious time.
Emerging blockchain technologies are poised to revolutionize the global economy and we’ve been slow to confront the reality that an adversarial China is already running ahead of us in bringing our own innovations to market. To grasp the stakes, imagine if America had remained blindly loyal to flip phones while the world was connecting on their smartphone screens. The issue is that stark.
If the United States fails to act swiftly to create a safe and secure regulatory framework for digital currency, we will soon find ourselves at a distinct disadvantage to our most aggressive and determined global competitor. And because other countries are already pursuing a cryptocurrency regulatory framework, the United States may soon find itself a cellar-dweller in financial technology. If we continue to take a weak approach, competing nations will only take this as an opportunity to pounce.
A lack of understanding by lawmakers and regulators is at the root of this failure. Attempts to apply our current securities laws – crafted for a pre-digital, 20th century economy – are inherently doomed to fail. Digital assets require their own framework, something the rest of the world has already figured out.
In contrast, the United States has effectively treated cryptocurrency as a threat instead of an opportunity. Accordingly, the Department of Justice unveiled a survey of the U.S. cryptocurrency enforcement framework last month that revealed our government is only interested in cracking down on international digital exchanges.
While our government places its focus on punitive actions to rein in the emerging financial technology, China is already testing its digital yuan. By taking the lead, China is skillfully positioning itself to replace the United States as the dominant financial power of the 21st century.
China isn’t the only nation that understands the need for an effective and safe regulatory framework for cryptocurrency. Governments and central banks in smaller nations like Sweden, Cambodia, Uruguay and Thailand have all taken action to prepare for a burgeoning crypto industry, working towards establishing their own central bank digital currencies.
Why is the nation that has led the world in technological innovations in the digital age failing to meet this challenge?
There are some well-positioned voices in the United States who understand the severity of the threat and the need for fast action. Securities and Exchange Commissioner Hester Peirce has been among a select group of financial leaders who have spoken out to prod our lumbering regulatory institutions to act more aggressively and affirmatively towards a U.S. digital dollar. Taking the initiative to encourage innovation and promote domestic cryptocurrency initiatives, Peirce has crafted a “safe harbor” proposal to protect digital currency startups. On the flip side, Chairman Jay Clayton has continued to follow a delayed approach that continues to put our nation in last place in the tight geopolitical crypto race. If Clayton wants to stand in the way of Commissioner Peirce’s advancements, perhaps he should step aside.
Peirce is exceptional in possessing the vision to see the potential – and, likely, the inevitability – of digital currency becoming an integral part of the world’s economy. But if voices like hers remain isolated, the United States will soon find itself hopelessly behind.
It is no longer a question of if digital currency will become a major driver of the world’s economy, but when, and from where. Consumers – especially American consumers – will always choose the convenience of making secure, inexpensive transactions to get more and more products and services. Crypto technology is the next big leap for speed and cost efficiency. Are we just going to hand it over to others like we did with manufacturing?
Congress and the SEC need to act soon to create a safe and secure regulatory framework for digital assets. U.S. leaders must take this matter seriously: The digital dollar – not the yuan – must be the dominant cryptocurrency for the United States to maintain its primacy in world finance.
Continuing efforts that attempt to retrofit our dated securities laws to emerging digital currencies are doomed to fail. We need a new framework so that promoting innovation and growth within our nation’s private fintech firms is no longer a novelty or luxury, but a necessity. The leaders of other nations have already figured this out. American consumers, investors and businesses will pay the price if we fail to do likewise.
