Across my career at the intersection of national security and our economy, I have witnessed firsthand several game-changing technological revolutions. From GPS to the internet and from smartphones to artificial intelligence, our nation’s unmatched capacity to innovate has created unprecedented benefits for the economy and security.
Another wave is upon us: Blockchain and crypto offer America the chance to lead another generation of critical innovation, but policymakers must do their part, or this opportunity will slip away. If the Biden White House and Congress don’t provide the support and regulatory certainty this burgeoning industry requires, there is little doubt it will develop and thrive elsewhere.
Blockchain is a technology that provides a transparent ledger for something of value. Crypto uses blockchain to enable transactions between people online. The benefits of America leading in blockchain and crypto are clear.
First, these technologies are grounded in principles such as individual freedom, limited government, and privacy, which, as a conservative, I hold dear. Conducting transactions through blockchain eliminates powerful and oftentimes expensive intermediaries, making the financial system more accessible.
While the ledgers showing transactions are public, the identity of account holders is anonymous, providing privacy for accounts doing legal transactions while exposing illicit transactions to significant scrutiny. This balance between privacy and the free flow of data is sorely needed in an age in which social media platforms and other tech companies have unparalleled data on every user.
Second, blockchain and crypto are an economic engine. By 2030, the industry is expected to support as many as 4 million jobs. As the CEO of a software company during the Pittsburgh renaissance, I know the economic impact tech innovation can have. With growing blockchain and crypto ecosystems in my home state, places such as Allentown and Philadelphia could reap the benefits of this boom. Blockchain also has applications beyond finance that will bring innovation to other industries. For example, the secure ledger technology can protect health data and verify supply chains.
Third, American leadership on blockchain and crypto is critical to our economic and national security. One of the enduring strengths underpinning American economic power and prosperity is the status of the dollar as the world’s reserve currency. But we cannot take that for granted. While the overwhelming majority of crypto transactions are dollar-denominated or involve dollar-backed stablecoins, other countries are imposing regulations to encourage non-U.S. dollar alternatives. Maintaining the link between crypto markets and the U.S. dollar is critical for the future of dollar primacy.
Finally, blockchain provides new national security tools to go after financial crimes and deter bad actors. Traceable and transparent blockchain ledgers allow law enforcement to follow the money and identify illicit accounts more easily than private transactions. This is very different from the tools that have traditionally facilitated money laundering. That’s why it’s important to have crypto exchanges based in America — U.S. exchanges must comply with U.S. laws, including anti-money laundering standards and sanctions.
Our competition is moving fast to seize this opportunity for itself. Chinese President Xi Jinping has said that China should lead on blockchain, which would pose significant national security concerns for Americans if China is not kept out of our market. The European Union and places such as Japan and Singapore have begun developing their own crypto regulatory frameworks.
Meanwhile, parallel efforts in the United States are stuck in Congress. And to make matters worse, Securities and Exchange Commission Chairman Gary Gensler has aggressively intruded into regulatory gray areas to stifle crypto innovation and prosecute U.S.-based crypto firms. In the absence of congressional action, Gensler’s heavy-handed approach will both determine and deter the future of crypto in the U.S.
Leaders in Congress must act to ensure America captures this next wave of innovation. They should embrace bipartisan efforts such as the Financial Innovation and Technology for the 21st Century Act, which would create clear rules for the industry to protect consumers while allowing for continued innovation.
Lawmakers must also stick to the facts. Sen. Elizabeth Warren (D-MA) and other skeptics allege that crypto is a significant source of financing for terrorist groups and other illicit activity. The evidence tells a different story — analysts estimate that crypto transaction volume associated with illicit activity is only 0.34%.
In fact, crypto and blockchain have proven to be an asset for combatting terrorist financing. As an example, the U.S. government seized millions of dollars in cryptocurrency from Hamas, al Qaeda, and the Islamic State in 2020. Because their transaction ledgers were traceable, federal law enforcement also seized more than 300 crypto accounts, dismantling an entire money laundering network, all because they were on blockchain.
Let’s not miss the next innovation wave. Tens of millions of Americans own crypto, and the benefits to society are increasingly clear.
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As the former CEO of one of the largest investment firms in the world, I understand well the tax imposed by regulatory uncertainty. Our regulatory frameworks for these technologies should provide tangible benefits to U.S. companies, protect individual privacy, and make moving offshore unattractive.
I’m running to be Pennsylvania’s next senator to help make sure American innovators receive the regulatory certainty they need to succeed. It’s good for Pennsylvania and for America for us to remain at the tip of the technology spear.
David McCormick is a West Point graduate and combat veteran who has been the CEO of two successful businesses. He is running for U.S. Senate in Pennsylvania.
