The US Government is putting the squeeze on crypto. Recently they shut down two banks that were friendly to crypto and acting as bridges between trading exchanges and the real world. These were Silvergate and Signature Bank of NY. These closures follow some events that might appear coordinated to some people. This includes the shuttering of the Paxos BUSD stablecoin and the NY lawsuit against Kucoin and Ethereum.
One can think that these are coincidental actions against crypto, but some feel that it is similar to Operation Chokepoint — but instead, it’s designed to try to kill crypto. In its place, the US plans to release a Central Bank Digital Currency (CBDC) that can track where everyone spends their money. Obviously, that will be a nightmare for privacy advocates.
President Joe Biden also announced plans to eliminate tax deductions for crypto wash trading at the end of the year that are bought back immediately after, and an added 30% tax on the energy used for mining in Proof of Work. Earlier, the SEC under Chairman Gary Gensler had barred Kraken from implementing their staking service. This follows previous lawsuits against other crypto entities, such as their focus on Ripple.
Apparently, the US wants crypto and Web3 to grow elsewhere. They may say otherwise, but their actions speak louder than words — especially as they regulate with enforcement instead of guidance.
Against this backdrop is the European move to pass legislation through the Markets in Crypto Assets (MICA) legal framework. There is also the move of the Chinese government to legalize crypto in Hong Kong. Across Asia, Europe, the Middle East and other places, they are looking for ways to attract more crypto and Web3 startups since they know it can bring economic wealth to their shores.
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The US has historically been a friend of innovation. Its innovation ecosystems in Silicon Valley, Route 128 in Boston, Austin in Texas and other places have produced some of the leading household names in tech. The NASDAQ has created significant wealth over the past few decades of its existence. Companies in the FAANG (Facebook, Apple, Amazon, Netflix and Google) stocks of the NASDAQ 100 have market caps larger than some countries. Apple alone already has a market cap of over $2T. When people worldwide speak of technology, they look to the US for leadership.
Take the internet for example, a development that began with the US-funded research at DARPA but was eventually developed by Tim Berners Lee at CERN in Switzerland outside the US. Parts of the web were developed in different places, but a lot of it took place in Silicon Valley. The first browser, Netscape Navigator, started at the University of Illinois, and was the first major IPO of the Internet era in 1995.
If the US had stood in the way of Internet innovation, companies like Google, Facebook, Twitter, Youtube and others would not have innovated and grown up in the US and employed thousands. Instead, they would have been foreign companies like Baidu and Tencent, employing those outside the US to innovate in tech.
Every technology — from traffic lights, to automobiles, to airplanes, to the telephone, to the Internet — has had their high-profile detractors early in their life cycle when they were first misunderstood. The expression “red flag” came from the person waving a red flag in front of automobiles to warn people when these were first introduced on roads. Newsroom editors who were used to ink and print looked down on their online news sites when they were new, but if you look now, most newspapers only exist as online editions.
Don’t automatically believe the public pronouncements of “experts” who may not grasp the potential of new technology. In 1997, a Nobel Prize winning NYT columnist said, “The Internet’s impact on the economy has been no greater than the fax machine’s….ten years from now, the phrase ‘information economy’ will sound silly.”
The same negative attitude is being put forth about crypto and blockchain from those in the more traditional investment spaces.
With this move to try and kill crypto, the US is potentially ceding what could be its lead to other countries. Europe and Asia already lead in 5G and some aspects of chipmaking. If the US continues to protect the multi-trillion-dollar traditional banking and financial industry, it stands to lose a lot of wealth and jobs that crypto and blockchain can create to other countries that want it more.
Zain Jaffer is the CEO of Zain Ventures focused on investments in Web3 and real estate.
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.
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