U.S. Government’s Stance on Crypto is Becoming Divided
Historically, cryptocurrencies and governments have not mixed well. For years, BTC was used for illegal activities — now, the crypto ecosystem is a quick-growing space that has the potential to completely disturb the traditional financial system.
On one hand, the U.S. is looking to regulate anonymous payments and stable coins, while on the other hand, the government is reliant on cryptocurrencies and their possibility to save USD as the world’s reserve currency.
U.S. Government Takes Opposition to Crypto
The anonymity and decentralization of cryptocurrencies can be extremely dangerous. As seen with The Silk Road, BTC can provide an easy means for criminals to make illegal exchanges. Now, digital assets are the usual ransom for hackers, pushing the U.S. to take new measures against ransomware.
Last month, the FBI recovered $2.3 million in BTC from the Colonial Pipeline ransom. The US government is also searching for opportunities to trace transactions, last year, offering $625k to anyone who could break Monero and Lightning Network.
Additionally, the Biden administration is looking to crack down on ransomware by tracing crypto. The White House’s new task force will be offering bounties of over $10 million for information that leads to tracking down hackers; the caveat is this reward will be paid in BTC, showcasing a governmental use case for digital assets.
The crypto industry is growing quickly and providing thousands of jobs all across the U.S. The total market cap for all coins is currently $1.35 trillion and the infrastructure of businesses built around the market is quickly expanding.
According to a PWC report, the blockchain industry could boost the global economy by $1.76 by 2030, but with recent growth, this number could be much larger. Clamping down with regulations could slow the growth and in turn stunt the economic benefits provided by digital assets.
On another front, regulatory organizations work hard to keep investors safe from major losses. For example, if the U.S. stock markets are crashing, the exchange will use circuit breakers to halt trading in an attempt to tame the situation.
With cryptocurrencies, there is no regulatory oversight to help inexperienced investors. If crypto is crashing, there is nothing that can be done to save investors. On the other hand, there are arguments for the contrary:
Stable Coins Are Under Fire
Stable coins have become an essential part of the decentralized finance ecosystem, providing a stable on-chain asset. After seeing $1.7 trillion in trading volume for Q2 of 2021, stable coins are quickly picking up pace. This extreme growth is attracting major headwinds from regulators.
Just last week, Fed Chair Powell claimed that the U.S. needs to “appropriately regulate” stable coins. Additionally, Powell expressed his thoughts on crypto’s failure, saying,
“With cryptocurrencies, it’s not that they didn’t aspire to be a payment mechanism, it’s that they completely failed to become one (except for people who desire anonymity, of course, for whatever reason).”
As stable coins continue to prosper, the U.S. government may be seeing a more difficult implementation of a CBDC. Being pegged to the dollar, stable coins are already undermining the dollar itself and pulling monetary control away from policymakers.
Government officials do not have any plans to lose power over the economy, hence their large interest in regulating stable coins, paving way for a smooth road towards a CBDC.On the other hand, stable coins pegged to the USD could have a very beneficial impact on the U.S. maintaining the global reserve currency.
With doubts stemming over the United State’s ability to control reserve currency status, a heavy presence in the crypto world may play out to be very important. While the total crypto market cap of $1.35 trillion is minuscule in macro terms, the continued growth of the industry provides more opportunity for USD to cement its position as the world’s reserve currency.
While BTC has been around for over 12 years, the U.S. government is now feeling more threatened than ever.
As other countries integrate Bitcoin more and more, it looks as if the U.S. is taking a tough stance against decentralized digital assets. The battle is just beginning, and neither the U.S. government nor crypto will give up any time soon.
The bigger crypto grows, the more threatened the traditional economic system will be. While the U.S. is expressing interest in cracking down on crypto, the industry’s benefits are also very substantial. What will be the United States’ next take on digital assets? Let us know in the comments.