Calls To Ban Crypto Make Headlines, But They Ignore Reality
Articles discussing the possibility of banning cryptocurrency ignore the reality that cryptoassets have become part of the mainstream financial ecosystem; even proposing a ban would directly harm consumers, companies, and the United States economy.
Cryptocurrencies have long been viewed, by some, as convenient things to blame for cyberattacks, ransomware, and other digital criminal activity. The issue at hand, however, is that even though ransomware payments made in bitcoin or other crypto certainly make for splashy headlines, focusing only on these ignores two facts. Firstly, cybercrime and cybersecurity related issues existed long before bitcoin and other cryptoassets burst into the financial landscape. Criminals are adept at finding tools to enable criminal activity; there is no indication that banning cryptoassets would reduce cyberthreats.
Secondly, many of those same splashy crypto headlines ignore the fact that there have also been several high profile recoveries of funds by law enforcement agencies. The JBS bitcoin ransom recovery by the FBI was undoubtedly the highest profile instance of this kind, but law enforcement agencies across the world have successfully been cracking down on criminal enterprises seeking to leverage blockchain and cryptoassets. Some purists might decry the increased regulatory and law enforcement action, but reducing the criminal element in any sector should be viewed in a positive light.
Building on this point, some of the other common arguments against allowing continued cryptoasset development and proliferation center around the 1) potential for private currencies to undermine nationally issued fiat currencies, and 2) the risk from a national security perspective for developed economies, notably the reserve status of the U.S. dollar. Let’s break down some of those concerns, and see why proposing (or enacting) a ban of crypto is definitely not the solution.
Threat to financial stability. Recently, and by no coincidence right alongside the rise of stablecoin-based transactions, there have been discussions that cryptoassets might eventually pose a systemic threat to the global financial system. Peel back the layers, however, and the opposite is rapidly becoming apparent. Major enterprises – including those lying at the heart of global payment and remittance system – are rapidly embracing crypto, and these organizations include firms headquartered in the United States and abroad.
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Additionally, virtually every major financial institution is either allowing at least some customers to access cryptoasset products and services, or are actually directly engaging in crypto transactions, custodial services, or other crypto adjacent products. In other words, individual customers and institutional players are both increasingly getting involved and engaging with crypto transactions. Notably, involving these incumbent players should help assuage doubts about financial stability; these organizations are already equipped to deal with market risk, compliance, and market uncertainty.
Finally, this argument presupposes that the market cannot possibly absorb and integrate a new financial instrument, product, or service. The fallacy of this argument, when looking back at the slew of new products and services that have been introduced over the last several decades, should be obvious.
Undermining national security. The United States enjoys perhaps the single largest economic advantage in the world via the status of the dollar as the global reserve currency. That said, there is no inalienable right that the dollar should always serve in this role; numerous other nations have filled this role in previous eras. Cryptoassets and other forms of private money may indeed serve as a potential competitor for fiat based currencies, but the rapid rise of central bank digital currencies (CBDCs) shows just how proactively governments the world over are responding to this development.
While the United States currently may seem to be lagging behind other countries in the development and implementation of a CBDC, and it certainly is worth taking the time to get it right, that is absolutely not a reason to be discussing potential crypto bans. Competition, in all its forms, brings the best and most innovative results to the forefront – why should currencies be treated differently?
Many improvements, admittedly, have been made to the global payments system in the last several decades, but the fact remains that digital and cryptographically secured payments are the future of 21st century money. The United States faces economic and strategic competition across the board; having a robust and technologically advanced currency should absolutely be a part of the economic portfolio moving forward.
Cryptoassets have been, and continue to be for some, a convenient place to lay blame for cybersecurity risk, economic volatility, and the dangers of private actors wading into areas traditionally reserved for government. That said, the success and dynamic growth of the space the world over should provide evidence that this sector is opening up opportunities for both the private and public sector. Rather than focusing on the potential risks, of which there certainly are some, individuals in the marketplace have embraced the opportunity of cryptoassets for payments and other economic sectors. Policymakers would be well informed to take a similar point of view.