Cryptocurrency

To Avoid Danger, U.S. Must Lead on Crypto and Blockchain


“Those who came before us made certain that this country rode the first waves of the industrial revolution, the first waves of modern invention, and the first wave of nuclear power, and this generation does not intend to founder in the backwash of the coming age of space. We mean to be a part of it—we mean to lead it.”

That was President Kennedy more than a half-century ago. Even then, he understood better than most that America’s place in the world was bound up with our determination to be at the cutting edge of progress. We were a beacon of hope because the world knew that we would use our technological prowess to expand the rule of law and the basic human rights of all people. America’s promise was to ensure that breakthroughs would be used for the good of humanity.

Today, that same spirit still animates certain elements of progressive thinking. My fellow Democrats aren’t trying to smother the emerging industry being born from artificial intelligence—they’re trying to establish wise and fair rules that ensure both that its deployed safely and that it benefits everyone, and not just the very well off. They’re refusing to cede the advanced semiconductor industry to businesses overseas—helping instead to induce the industry to construct “fabs” domestically in places like my home state of Ohio. On a whole range of issues, Democrats are determined to keep America at the cutting edge.

Blockchain
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But when it comes to blockchain, namely the new technology promising to power a new, secure, decentralized, and transparent set of applications across a whole range of industries, many Democrats seem to have lost sight of Kennedy’s admonition. Having convinced themselves that various misuses of blockchain obviate its underlying value, Sen. Elizabeth Warren and her allies seem more interested in smothering innovation than harnessing its potential for the public benefit. While their concerns are understandable, their approach is fundamentally misguided.

By some measure, this challenge is less about this one technology than it is about the proper role government should play in shaping innovation. Blockchain, like nuclear fission and jet propulsion and satellite reconnaissance, and, yes, artificial intelligence, can be used for nefarious purposes. But that shouldn’t prompt Washington to seek to smother its development, or drive it offshore. What we need to do, instead, is develop a proactive approach to nurturing its evolution and shaping its impact. And that begins by dispelling what is the fuel for public suspicions—namely that crypto and blockchain comprise a hidden world of dark, mysterious, and dangerous activity.

It’s easy to understand why ordinary people worry about new technologies like AI and blockchain. Those of us who are of a certain age all saw Terminator when we were (probably too) young. The word “crypto” seems to connote that systems like Bitcoin or Ethereum are born where monks were buried in the Middle Ages.

Worse, the criminal fraud perpetrated by Samuel Bankman-Fried burnished a notion that the industry is inherently corrupt. Today, many have reason to suppose that terrorist organizations like Hamas are using blockchain to launder funding in ways that responsible authorities can’t track.

The truth, however, is exactly the opposite. Far from being shrouded, financing done using blockchain is entirely decentralized, secure, and transparent—that is, in fact, its defining feature. Transactions done through this new medium can’t be done without an intermediary because the technology itself makes separate ledgers that can be tracked forever. It’s far easier to smuggle the bag of cash earned from the sale of stolen art than it is to transfer money through blockchain.

Better yet, blockchain, like AI, or nuclear physics, can be used to solve all sorts of other problems as well. Instead of big tech controlling and selling our personal data, this new technology will allow consumers to sell it directly, or to choose not to sell it at all.

In short, these innovations can, if handled properly, return power back to citizens who for decades have felt disempowered. But in order to get there, we will need a clear, open, and understandable regulatory regime. If blockchain is going to work for the greater good, it can’t be left to the hazards of the wild west. What’s crazy is that blockchain’s greatest champions realize this—they’re asking to be regulated.

Realizing that everyone will benefit if Washington establishes clear rules of the road, those who believe in blockchain are calling on Congress and the federal government’s regulatory agencies to eliminate the ambiguity that threatens now to stymie future growth and innovation. But, to date, Washington has failed to respond.

Fortunately, Congress is now working to create the sort of regulatory regime that will do exactly that—a bill to ensure that crypto is not forced offshore where American regulators are not able to protect the public from those looking to abuse it. A bill some of my former colleagues have drafted known as Fit 21 would make clear which among the bevy of federal financial agencies would oversee blockchain applications in the financial world, establish disclosure requirements to protect against a second FTX fraud, and set the guidelines required to maintain a safe secondary market for digital commodities. A group of young, smart progressives, including California Congressman Ro Khanna, are leading on this issue; they’ve aligned themselves with JFK and Democratic Party‘s old school. But too many of their progressive peers have yet to see the light.

Today, Democrats tasked with facing the peril and opportunity of new technology are frequently faced with a false choice. They feel compelled to leave it to evolve sight unseen, as many free market fundamentalists often demand, or else try to stifle innovation altogether, as Sen. Warren and her allies want to do with blockchain.

President Kennedy made clear that there exists a middle way.

We can harness the best of blockchain, precluding our adversaries from developing it offshore, and protecting the public from abuse. But to do that, we will have to create a clear and transparent regulatory regime to keep watch on its development.

Fit 21 will allow a technology potentially as transformative as AI to grow safely here in the United States. Here, in the end, is another opportunity for America to lead. I just hope my fellow Democrats are on the right side of history. President Kennedy would want it that way.

Tim Ryan is a member of Coinbase Global Advisory Council and co-chair of the Blockchain Innovation Project. He is a senior advisor of the Progressive Policy Institute’s Campaign for Working Americans.

The views expressed in this article are the writer’s own.