Right around the time I entered politics, the U.S. government was figuring out how to embrace the growth of the internet. Investors were bullish, but skeptics warned about a disorganized platform where too many people had a voice and too few people added real value. In the decades since, the internet has developed into an indispensable tool that plays a fundamental role in almost every industry around the globe.
What many people fail to recognize from the internet’s success is that the United States, led by Congress and other key stakeholders, created a light regulatory framework in the early 1990s that fostered the web’s development and set a global standard for internet-based companies. Early on, with limited guardrails in place, young American tech companies, including Amazon, YouTube and Facebook — who are now rightly facing questions about size, reach and consumer privacy — were given a chance to develop, grow and ultimately entrench the United States as the globe’s most important tech innovator.
Since then, the world has become more globalized and increasingly more “flat” as Thomas Friedman labels it. Just like the internet, blockchain and crypto assets could improve financial markets and industries if the United States properly fosters its innovation. Not surprisingly, many people have a significant level of distrust over this new technology, immediately rolling their eyes when they hear about Bitcoin or other cryptocurrencies. Nevertheless, as we saw in the development of the internet, skeptics can be wrong. This is one of those cases.
Blockchain technology uses a public ledger that allows easy, transparent, permanent and instantaneous transactions to take place across its platform. With it, many entrepreneurs have developed crypto assets and businesses that allow for the purchase of goods, instantaneous cross-border payments and a transparent supply chain management. More important perhaps, it has improved the efficiency of services and has offered greater accessibility to financial services for lower- and middle-income people. With lower costs and more transparency, both consumers and companies will have a more active participation in activities that are currently out of their reach.
As a former elected official who always worked to bring people together, I believe that greater economic freedom, while harnessing American innovation, is an issue that both parties would support. To achieve this goal, it is essential for Congress, along with other stakeholders, to work together in developing a balanced and comprehensive framework for crypto tokens that will offer guidance for entrepreneurs and ensure consumer protection.
Without clear regulation, investors will be discouraged to finance crypto-related companies that can provide reliable, cheaper and more efficient services to low- and middle-income earners. Regulatory ambiguity will only stump growth and kill investment — possibly threatening America’s opportunity to once again become the front-runner of a new technology.
Policymakers should be proactive in searching for the right balance of regulatory requirements. That balance should reflect the interests of the Congress, the Security and Exchange Commission, industry experts, business and consumers alike. Because without the appropriate rules, the field has the potential to become the Wild West, which would jeopardize the ability of everyday consumers to leverage this technology to improve their quality of life.
Some states, such as Wyoming, Colorado, Ohio and California are already taking the initiative to understand and develop a framework for businesses that use blockchain and cryptocurrencies. California, for example, created a blockchain working group to evaluate the use of the technology in government and private businesses, while Ohio started accepting Bitcoin for tax payments.
Recognizing the potential of blockchain technology, these states are taking the lead by fostering innovation — through talks with key industry players and testing of new opportunities — and should serve as models for the federal government as it develops its own regulatory framework.
In the meantime, the SEC has been the most forward-leaning government agency to date in asserting that neither Bitcoin nor Ether are securities because they are decentralized coins. But even more clarity is needed to ensure creation of a smart, thoughtful and cohesive regulatory framework that will help foster more innovation in crypto assets, birth thousands of new American jobs and protect consumers.