When innovation brings change to an industry, the government’s role is to observe first and then manage the change as necessary. The government should not be an obstacle to progress. The Democratic Party has long been a champion of inclusionary innovation, smoothing the disruption to families and workers while spreading the benefits as widely as possible throughout the economy.
I fear, however, that with the fintech revolution rising through decentralized finance and blockchain technology, some in our party are mobilizing for a war on cryptocurrencies that could be futile and economically costly to the country.
There is wide agreement that regulation is needed for digital assets. There must be strict protections against money laundering and fraud in coin offerings and the financial products emerging in this $2 trillion asset space.
There also need to be rules around lending and interest-bearing products tied to a variety of cryptocurrencies, from stablecoins to bitcoin, as volatility is too high and unpredictable.
Rules will protect consumers as well as give clear guidance for the U.S. cryptocurrency industry to thrive and spread the economic benefits of their innovations. Congress should address these issues.
A Dangerous Lack of Understanding of Blockchain
The worry comes from gathering forces who want to go much further than setting down rules of the road. These voices want to severely limit all uses of this new technology, perhaps even ban it altogether.
This goes far beyond combating fraud and criminal activities. Some have called cryptocurrencies “bogus digital private money,” painting them as a mortal threat to U.S. economic policy and seeking to outlaw them in the U.S. This extreme approach seems premature and alarmist.
These views reflect a dangerous lack of understanding of blockchain technology, and making policy without in-depth understanding of the global impact could be harmful to our economy. The reality is that decentralized finance (DeFi) can improve the lives of working families and small business owners who struggle against structural inequality in traditional financial services.
For example, many decentralized crypto tokens are being used today by financial software companies to power everyday transactions that settle in seconds without fees, including with cross-border payments. These products are already being used by U.S. corporations ranging from Ripple Labs to MoneyGram to JPMorgan, and are gaining traction in the developing world where transaction fees often price most of the population out of traditional banking.
In the absence of congressional review, clear rules and guard rails are replaced by a policy of regulation by enforcement action at the Securities and Exchange Commission. Ripple is now charged in federal court with seven years of unregistered securities trades for distributing its XRP digital token, and the publicly listed crypto exchange Coinbase is threatened by the SEC over developing a lending product that its overseas competitors already offer.
The SEC and Treasury Department are reportedly preparing a generalized crackdown going beyond those cases that could ensnare every decentralized finance company that utilizes digital assets or the underlying technology.
A Reactionary Stance Harms Everyone
American innovators are leading in developing this technology that some activists want to ban. It doesn’t make sense, and it’s dangerous for Democrats to wage war on crypto.
These assets exist on the internet, which means they will simply go somewhere else along with the innovators and companies that are developing them. Nothing could be more harmful to building back better than having to import these technologies years from now.
Worse yet, there are now $2 trillion dollars invested in this technology, and millions of people are now engaged in the cryptocurrency space with a growing enthusiasm not only for investment gains, but with a deepening understanding of the technological promise it offers.
They span the political spectrum from right to left, and across demographic groups. Democrats should not turn these innovators into opponents by overreaching.
Democrats have long been on the right side of history on technological innovation. We were the champions for consumers and fairness in the Telecommunications Act of 1996 and the e-commerce regulatory framework of 1997, helping to ensure American leadership in the mobile phone and internet revolutions.
We can’t afford to abdicate this critical role in the DeFi revolution by falling into a reactionary stance that will ultimately surrender the issue to the Republicans. The country will be worse off in the end.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
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Albert Wynn is a former Democratic member of the House representing the 4th District of Maryland. Wynn served on the House Energy and Commerce Committee and the Financial Services Committee during his tenure. He is a senior director at Greenberg Traurig.
