In recent talks, former Secretary of State Hillary Clinton claimed that an increase in the use of Bitcoin would take power away from the United States and hand it over to Russia and China. While an increase in the importance of Bitcoin may weaken the US dollar’s status as a global reserve currency, it is not so clear whether this would translate into greater influence for China and Russia.
Summon Russia to Tackle Crypto
The 2016 Clinton campaign maintained its argument that the election suffered from Russian interference. This may be a possible reason why Clinton is looking to create a fear of a Cold War-style “red threat” around Bitcoin, as it ties in with the concerns of his support base.
In Singapore on Friday, during a virtual appearance at the Bloomberg Forum on the New Economy, the former presidential candidate positioned cryptocurrencies as a threat to the USD:
“Another area that I hope nation states start paying more attention to is the rise of cryptocurrency – because what seems like a very interesting and somewhat exotic effort to literally mine new coins. in order to exchange with them has the potential to undermine currencies, for having undermined the role of the dollar as a reserve currency, for destabilizing nations, perhaps starting with the small but going much larger ”,
In addition, during his appearance at Rachel Maddow of MSNBC On November 24, Clinton explained how Bitcoin could destabilize the US dollar:
“We are looking at non-state actors, either in concert with states or alone, destabilizing countries, destabilizing the dollar, the reserve currency. There are so many big questions the Biden administration needs to answer.
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The Crypto Regulatory Roadmap
As Hillary Clinton was parting ways with Rachel Maddow’s show, she insisted it was urgent, saying:
“We don’t have a lot of time, and therefore, I hope from everything I hear from them that this is exactly what they are going to try to do.”
This is probably a reference to the recent “Crypto-Asset Policy Sprint Initiative”, in which a banking consortium, led by the Federal Reserve, established a roadmap to regulate stable coins and the interaction of institutions. traditional banking with crypto assets. Then there’s the last-minute crypto amendment in the recently passed infrastructure bill, taking effect in 2023, which will change the way crypto is taxed.
The US crypto regulatory framework was described in this tweet by Ian Mair:
At the same time, the Congressional Blockchain Caucus is growing, supported by crypto lobbying organizations, which themselves have increased their funding. Some of the most notable are the Blockchain Association, the Digital Chamber of Commerce, and the Coin Center. In turn, they receive funding from established crypto companies, reflecting a growing lobbying base for the industry.
Chain finance is inherently resistant to regulation
It should be noted that different markets use Bitcoin differently. In the West, Bitcoin is widely viewed as a speculative investment asset and a hedge against inflation. In developing countries, Bitcoin is seen as a more convenient cross-border tool for remittances. For example, regardless of repeated “bans”, Nigeria is the world leader in crypto adoption with over 30% of its population young. Clinton’s calls for more Bitcoin regulation could therefore be just as ineffective if the regulation attempts a total ban like in Nigeria or China.
Soaring inflation combined with near zero interest rates are powerful forces for further adoption of crypto, which in turn are both being driven by central banks. At the same time, decentralized finance (DeFi) has already gained a foothold on the backs of smart contract platforms; from Ethereum and Binance Smart Chain, to Solana, Avalanche, Radix, Polkadot and Cardano – with many more in the works.
Smart contracts themselves are changing the way the financial game is played. Instead of worrying about malicious tampering and mediators, as the GameStop saga shows, DeFi can rest easy. Indeed, smart contracts are on the verge of self-regulation when it comes to consumer protection.
Because on-chain finance is so far removed from the traditional financial manual, DeFi is extremely difficult to regulate. This is why most of the regulatory focus is on stablecoins, as a bridge between TradFi and DeFi.
With Russia similarly struggling to figure out how to approach crypto regulation, Clinton’s claim that the transfer of power would go from nation to nation is of little value – is it more likely than the loss of he monetary influence of the United States would be the gain of the developing world.
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About the Author
Tim Fries is the co-founder of The Tokenist. He has a BSc in Mechanical Engineering from the University of Michigan and an MBA from the Booth School of Business at the University of Chicago. Tim was a Senior Associate in the investment team of RW Baird’s US Private Equity division, and is also a co-founder of Protective Technologies Capital, an investment firm specializing in detection, protection and control.