Global South View: US Politicians Aren't Saviors of Crypto; Innovation Should Precede Regulation

Crypto Emerges as a Key Election Issue

In recent weeks and months, there has been significant discussion about the potential impact of a second Donald Trump term on BTC and the crypto industry. The former U.S. President’s vocal support for crypto has drawn attention from many, including financial freedom advocates. Crypto’s emergence as a key election issue has even prompted mainstream media outlets like The New York Times to publish op-eds exploring its growing importance.

Meanwhile, Trump’s endorsement of BTC and mining, along with the feedback he has received, appears to have prompted the Biden administration to reevaluate its crypto strategy. Before its recent about-face, the Securities and Exchange Commission (SEC) appeared not only determined to refuse approval of an ether ETF but also intent on stifling the cryptocurrency altogether.

The SEC’s lawsuits against Ethereum creators and public statements from Chairman Gary Gensler regarding ethereum ( ETH) were interpreted by the crypto community as a clear sign of a bleak future for the number two cryptocurrency. While the SEC initially failed to force various crypto projects to close ranks, its approach of regulation through enforcement actions made clear its intention to pursue the entire industry.

Therefore, fighting back became the only option, and crypto proponents and companies have coalesced around lobbying groups sympathetic to their cause. This unity seemingly contributed to the recent shift in the SEC’s stance, evidenced by both its consideration of ether ETF applications and the growing number of pro- crypto lawmakers across the political spectrum, raises fundamental questions. This growing support of political actors, however, also raises questions.

Embracing Political Players Comes at a Cost

Are bitcoiners and crypto enthusiasts risking future regrets by supporting politicians who seemingly back their cause? What are crypto industry players offering in exchange for political backing, now deemed crucial?

Asking these questions is essential, as current actions may have future consequences. It’s also necessary because politicians often say one thing and do another. The recent Trump and Biden debate’s lack of crypto discussion highlights the potential risks of this approach.

To understand why partnering with the sometimes self-serving politicians is ill-advised, we must look back over 15 years. At the time, there was anger towards politicians and their parties stemming from failed policies that led to the 2008 financial crisis. In response to the crisis, Satoshi Nakamoto introduced a proposition that had been in the works before the meltdown. Known as bitcoin ( BTC), this proposition was touted as “a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.”

Indeed, the economic situation prevailing in most Western countries at the time convinced many people that bitcoin was a genius solution to help them insulate themselves in the future. While BTC emerged from a broken Western financial system, it nevertheless became an alternative long sought by those in the Global South, who had experienced similar crises without the means to challenge their financial systems.

As it increasingly became clear that BTC and crypto were their likely saviors, these alternatives were embraced by people from the Global South. Today, the growing usage of crypto in the Global South, particularly in the post-pandemic era, shows that BTC and digital assets are functioning more as alternative stores of value than investment tools. In regions where the U.S. dollar is scarce, stablecoins like USDT and USDC are used to settle cross-border obligations.

The efficient and cost-effective transfer of remittances using cryptocurrencies drives their utility in much of the Global South. This use case alone should convince politicians like U.S. Sen. Elizabeth Warren that BTC and similar innovations can do more good than harm. However, Warren’s relentless attacks and efforts to stifle their use suggest otherwise. As an influential Democrat and perhaps a key contributor to the Biden administration’s crypto policy, Warren’s actions have repercussions beyond U.S. borders.

For example, Warren and other U.S. politicians have targeted stablecoin issuers Tether and Circle, highlighting Hamas and other alleged terrorist organisations’ use of USDT as evidence of stablecoins’ use by bad actors. If regulators both in and outside the U.S. were to act on Warren’s calls to restrict crypto usage, many families relying on crypto or stablecoin-based remittance platforms would suffer.

Interestingly, the U.S. Senator has rarely addressed the potential benefits of Bitcoin ( BTC) or stablecoins in her public letters. Instead, she has focused solely on instances where cryptocurrencies have been used for illegal activities. This focus is disappointing for someone who claims to champion the cause of the public.

If Sen. Warren and her colleagues truly understand the factors that made the United States one of the most innovative countries (if not the most), then U.S. agencies should have long abandoned the idea of scrutinizing every innovation so heavily. Unfortunately, this has not happened because influential politicians like Warren are comfortable with what the SEC and other U.S. are doing.

Innovation Precedes Regulation

However, it should be said that this approach toward cryptocurrency is akin to demanding that Orville and Wilbur Wright demonstrate their experimental airplane had passed rigorous safety tests before conducting trials. There is no doubt this approach would have significantly delayed the development of functional airplanes.

Therefore, we can assume that responsible officials did not obstruct the Wright brothers when they proposed their idea. They likely recognized its revolutionary potential, even with its inherent dangers. This supportive environment likely aided the Wright brothers’ perseverance, ultimately leading to the thousands of airplanes we see flying today. The Federal Aviation Administration, for instance, was established only after the Wright brothers had achieved their feat.

This approach it would seem was applied to many innovations over the past century. We use these innovations today because leaders and regulators at the time understood that progress often required taking risks. As history has shown, successful innovations eventually spawn multi-billion-dollar industries. It is only then should governments consider establishing specific regulatory bodies to oversee such industries.

In other words, innovation must precede regulation; this is the natural order. Reversing this sequence would discourage innovation and lead to stagnation. While many U.S. leaders undoubtedly view cryptocurrencies like BTC as a threat to the dollar’s hegemony, feigning a crypto blockade to preserve this dominance is irresponsible.

Fear of the unknown should never hinder progress. Understanding that no legislation can suppress a useful innovation should persuade politicians like Warren to cease supporting measures that stifle creators. While the endorsement of cryptocurrencies and other innovations by Trump and others is welcome, it should be for the right reasons. Meanwhile, crypto industry players should prioritize the needs of their most important stakeholders – users, not politicians.

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