US Lawmakers Must Finally Embrace Bitcoin
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It's no secret that the topic of bitcoin and the broader cryptoasset space has always been a matter of controversy and debate in the United States. After being ridiculed by most TradFi institutions in the US and having 11 spot Bitcoin ETFs quickly attracting billions of dollars since their inception, it has become clear that the US private sector has embraced Bitcoin and tokenized payments. These institutions include Blackrock, the world's largest asset manager, and JP Morgan, the largest and most influential bank in the United States. At the same time, investment in Bitcoin continues to reach all-time highs, other indicators continue to indicate greater interest in Bitcoin. space such as stablecoin capitalization and the resurrection of the NFT sector.
Despite these trends, news, and positive private sector indicators, the response from U.S. policymakers has been fierce. The SEC continues to push to classify virtually all cryptoassets as securities, has filed lawsuits against Coinbase (an SEC-registered exchange), and launched new investigations against organizations that do business with Ethereum.ETH Foundation. Additionally, politicians continue to train despite the obvious success of Bitcoin and other token assets. Elizabeth Warren has remained one of the most vocal US anti-crypto politicians, with her positions strengthening as the White House recently reintroduced a potential 30% tax on Bitcoin miners.
Such divergence cannot continue and is completely counterproductive to balanced conversations about which technologies are well-positioned to reshape money and business in the future.
The dollar is already digital
According to a study by Federal Reserve Bank of San Francisco, only 19% of the total, and 6% by value, of dollar transactions were made in cash. Regardless of which metric is used to measure the pivot of dollar transactions, the reality is clear: the dollar has already gone digital. This is not to dismiss the arguments made both for and against a central bank digital currency (CBDC); both parties have valid concerns that need to be addressed productively.
The debate around CBDCs, however, potentially overshadows the reality that transactions, both for businesses and individuals, are already increasingly digital/virtual in nature. In this context, it seems logical to conclude that as tokenized payments and blockchain-based transactions continue to increase in frequency and value, these technologies will become part of dollar transactions.
At this point, well-known companies like JP Morgan and PayPalPYPL, launched tokenized payment products for internal use and stablecoins respectively; fighting against these trends seems shortsighted.
Money is a technology
From this first point, it becomes increasingly clear that money is less a currency (not to mention the obsolescence of physical units) than a technology. As digitalization accelerates across all aspects of the global economy, whether driven by blockchain or another technology, money is evolving into another technological application. As digital and virtual transactions account for a growing percentage of total transaction volume and value, and tokenization of TradFi assets is underway (and led by TradFi institutions), the line between money and technology is almost invisible.
These trends don't even address the important role that digital and tokenized transactions will need to play as electronic gaming, streaming content, and augmented reality continue to gain traction. The Metaverse may have been overblown at first, but AR and VR continue to improve and represent a near-ideal use case for tokenized/tech money.
The United States has long been a hotbed of technological innovation, and ignoring the changing currency would hurt both consumers and businesses.
Reserve status is not a right
The United States enjoys one of the most exorbitant privileges any nation can ever know thanks to the dollar's role as the world's reserve currency. While the U.S. dollar has served as the backbone of global financial transactions and markets for nearly 70 years, it is almost inconceivable to imagine a world where this is not the reality. Difficult, but a state of mind that ignores historical precedent; Many countries and empires have held the world's reserve currency in the past, and the United States is just one of many countries whose currency has held this position.
As challenges to the United States' economic and geopolitical strategies continue to emerge and intensify, combined with the digitalization of U.S. dollar transactions and the nation's technological rise, the reserve currency status of the dollar should not be taken for granted. Policymakers should instead rely on private market efforts to integrate tokenization, embrace dollar digitization, and proactively invest in the technological future of the currency.
Instead of fighting against the tide, U.S. policymakers should follow the private sector's lead in embracing bitcoin and other cryptoassets.
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