Developments from the past week have once again put Washington in focus for the crypto community. First, there was the 2021 budget proposal which saw the Trump administration tentatively allocating funds for the express purpose of controlling digital assets.
The reaction to the proposal has been mixed. Some see it as a positive sign of growth, signaling that crypto is here to stay and the government is ready to work with it in a constructive, long-sighted fashion. Others are not sold on Uncle Sam’s interventions into the fintech space and see this as just the latest move from an establishment whose speech has been at times dismissive, at times serious — but whose actions have always an obstacle to progress.
The inclusion into the proposed budget is a big first when it comes to American regulatory posture towards cryptocurrency, regardless of how the intent behind the move is perceived. It seems that the reasoning behind the increase in attention runs back to the unveiling of Libra, Facebook’s planned cryptocurrency.
If the behavior of lawmakers and members of the American financial establishment is anything to go by, Libra seems to have caught everyone napping and now they are scrambling to get up to speed. The other development out of Washington is also tied to Libra, with Federal Reserve Chairman Jerome Powell telling the House of Representatives Financial Services Committee that Facebook’s cryptocurrency has impelled the Fed to really start looking into the possibility of creating a digital dollar.
For an insider’s take on what to make of these stories and how they could impact things in the cryptocurrency industry, we talked with Changelly cryptocurrency exchange CEO Eric Benz.
Budget proposal signals new approach
We began with the budget proposal and what increased regulatory attention spells out for the future. Benz was not surprised that the government is seeking to further regulate, but does believe that it could be approaching the situation in a more mutually beneficial manner: “Whenever it comes to the US economy, lawmakers always approach it with the utmost level of security and control. Whenever this system is questioned or under attack, the force pressuring it needs to be contained. The government can decide to spend whatever amount of money to 'limit' or 'control' these cryptocurrencies but what they ought to be doing instead is learning how to harness the power and innovative qualities that cryptocurrencies provide.”
However, Benz pointed out that attempting to regulate and regulating are two different things. This is still a preliminary proposal and it is aimed at entities that were, in some cases, specifically designed to be resistant to centralized authority. So regulators will have a long way to go if they want to make good on what they are talking about here.
There is, of course, the question of what kind of example this could potentially set for the rest of the world, and whether we will see other countries following suit. Benz doesn’t think that if this proposal does go through it will lead to other countries following America’s lead per se: “I believe less governments are looking to America for examples of what they should be doing when it comes to dealing with cryptocurrencies or for much of anything else for that matter. There is no possible way for any single government to tie up the global cryptocurrency circulation as it has, by its nature, been designed to be resistant to any outside control or regulatory oversight.”
Libra a wakeup call to the Fed
From there we went on to discuss the research the Fed has been doing into the creation of national digital currency. Benz sees this as a good sign, and thinks that should the Fed move forward with the creation of a digital dollar, this stands to benefit the entire industry. He said, “Over the coming years we will see many attempts to make cryptocurrencies more mainstream. The more educated people get on this and the more businesses there are supporting development, the better the adoption and level of understanding become. Any sort of National 'stable' coin will, of course, fuel adoption and allow others to better comprehend really what this new digital money movement really is.”
As for Jerome Powell’s comments, portraying the launch of Libra as a wakeup call, Benz hopes that the now-awake establishment takes a proactive and constructive, rather than restrictive, stance moving forward. Benz explained, “Libra came at just the right time in my opinion and really woke everyone up to just how transformative and innovative decentralised finance actually is. Due to the fact that BTC and many of the other cryptocurrencies are decentralised by their very nature, they serve as good examples of how we don't need to rely on a central authority to conduct financial transactions. The hope is that governments will see the success of these projects, and, depending on how Libra turns out, Libra as well and not try to tinker too much. The best-case scenario is further incorporation into the fabric of American economic life without trying to change crypto too much, or try and enforce it to be one thing in particular.”
With Powell talking about the possibility of a digital Chinese Yuan entering the marketplace, we talked about whether a kind of competition akin to what happened years ago with the space race could take shape between the US and China. Benz thinks that the competition is certainly going to be positive in terms of development, but believes that it is much wider than a competition between two countries: “There is a massive race at the moment for technological breakthroughs and blockchain along with crypto are at the top of that list. Every government body is trying to figure out how to harness the power of crypto. Currently, they think the best way of doing this is by creating a tokenized version of their national currency. Governments across the globe are entering a new era of decentralised finance and if they do not adapt and harness this technology they will clearly miss out on one of the biggest movements in history.”
With the cryptomarket showing signs that it isn’t going anywhere, Facebook gearing up for the release of Libra and an election on the way, 2020 could very well be a definitive year in terms of how states will view this technology in the future. Stay tuned as we continue to cover this developing situation.