Op-ed: Offshoring crypto hurts the financial system and America’s geopolitical standing, says Coinbase CEO Brian Armstrong
Coinbase Founder and CEO Brian Armstrong attends Consensus 2019 at the Hilton Midtown on May 15, 2019 in New York City.
Steven Ferdman | Getty Images
The traditional financial system has served us well for centuries, but it’s beginning to show its age. Like all systems before it, the day has come when technological advancement provides the opportunity to make it faster, more efficient and easier. From cable to streaming, cell phones to smartphones, and mail to email, advancements in technology have updated almost every industry we interact with in an ever more connected online world. Except for one.
While you might be able to bank online, the way in which the traditional financial system operates behind the scenes has largely gone unchanged for at least 40 years. And the American people are starting to feel it. Nearly seven in 10 Americans believe that the financial system needs major changes or a complete overhaul, according to the most recent research from Morning Consult. That’s where crypto and the technology that underpins it, the blockchain, come in. Crypto is a faster, more private, efficient, cheaper, and user-controlled financial system. It’s not a replacement of the traditional financial system, it’s an update. An update that has the potential to increase global economic freedom and empower millions of previously unbanked people around the world.
While the consumer benefits that crypto could bring to the financial system are myriad, it’s also important to recognize the geopolitical benefits. The U.S. has long been the leader in global economic and political affairs, but its dominance is being challenged by other global superpowers. China, for example, has made significant progress in digital currencies and has already launched its own digital yuan. Additionally, the U.K., Japan, and EU have all made significant progress, with the EU most recently introducing MiCA which is intended to close gaps in existing EU financial services legislation by establishing a harmonized set of rules for crypto-assets and related activities and services.
By embracing crypto and other forms of digital finance, the U.S. can not only update its financial system, but also solidify its status as a geopolitical powerhouse. The dollar has enjoyed being the world’s global reserve currency for decades, but it has never been under more pressure. Imagine a world in which the U.S. issues its own USD stablecoin on the blockchain. Not only would this provide access to the dollar to millions of the previously unbanked and underbanked people, but it would also be the de facto digital currency for remittances and international currency transfers ensuring that the dollar remains the global reserve currency both on and off chain. We’ve recently seen this in effect in Ukraine where the United Nations Refugee Agency (UNHCR) has used USDC to get aid into the hands of those impacted by the regional conflict.
America is at a once-in-a-generation inflection point: we have the opportunity to be the leader in the digital currency space and reap the benefits this leadership enshrines, or we can concede our leadership role to geopolitical adversaries who are eager to take the mantle as the 21st century’s global heavyweight. As other countries implement regulations and guidelines for cryptocurrency, the U.S. risks falling behind both technologically and politically.
I chose to build Coinbase in the U.S. because I believe that America should be at the forefront as the architecture of the internet evolves into the next generation of the financial system. Coinbase has been advocating for clear regulatory frameworks for crypto for more than a decade. Yet while we see other jurisdictions progress, the U.S. seems more focused on turf battles between regulators. No other country in the world has spent as much time and energy trying to convince its citizens that crypto assets are securities. The U.S. is missing the forest for the trees.
To see the impact of sending innovation offshore, we need only turn to mid-2020. The U.S. semiconductor industry was once at the forefront of innovation, with companies like Intel and IBM leading the way in developing new technologies. However, in the 1980s and 1990s, a combination of factors led to a shift in the industry, with semiconductor manufacturing increasingly moving offshore. Today, we’re suffering the consequences — chip shortages have impacted our entire economy — from the automotive industry, to healthcare to the supply chain. It’s critical that we learn these lessons and keep innovation onshore.
The U.S. government needs to take a more proactive approach to cryptocurrency and provide a clear regulatory framework for the industry, one with forward-looking policies that recognize the many unique and innovative aspects of blockchain technologies. This will create a more stable and secure environment for cryptocurrency to thrive and will help to attract more investment and talent to the US.
Companies like Coinbase are leading the way in fostering innovation and creating a secure environment for cryptocurrency to thrive, but we can’t do it alone. It’s time for the U.S. to take action and work with its U.S.-based crypto companies, not against them, to build a comprehensive regulatory framework that protects users, empowers innovators, and gives the American people a financial system built for the 21st century.
Brian Armstrong is the CEO and Cofounder of Coinbase.