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U.S. leadership in global technology is critical to national security. The government’s current stance on crypto puts that leadership at risk.

Tl;dr: The U.S. has historically led the world in technological advancements by fostering responsible innovation. It is critical to nurture and support new and disruptive innovation because it is impossible to know which technologies will turn out to be the next cell phone, semiconductor or internet. As our adversaries and allies alike embrace transformative uses for crypto and blockchain that serve their own national security interests, the U.S. must reassert its leadership role or risk falling dangerously behind. America can’t risk being on the outside looking in as crypto and blockchain technology are developed.

By Coinbase Institute

Policy

, April 26, 2023

, 3min read time

Coinbase Institute

At Coinbase, we’re working hard to help update the financial system by building trusted products that expand the utility and adoption of crypto because we believe crypto and blockchain technology have the ability to increase economic freedom and opportunity around the world. Coinbase chose to become a public company in the US because we believe the US would best be served by embracing this fundamental innovation, but we’re also focused on international markets, many of which are moving forward with strategies to become “crypto hubs.” We would like to see the US take a similar approach, but a regulation by enforcement approach in the US is instead leading to a disappointing trend for crypto development in the US. Today, we'll be analyzing how the US would be taking a massive national security risk by not embracing crypto as a technology.

Technology and national security have long been interconnected. During World War II, America protected its citizens and ideals in large part through its technological dominance, which not only generated more effective weapons, but also ushered in the age of the digital computer. And while the Soviet Union no longer exists, the technologies the U.S. developed to compete with the Soviets in space are everywhere. As these innovations have resulted in the stunning, nearly continuous expansion of the country’s economy over time, today, two of the United States’ key competitive advantages―economic strength and power on the world stage―are rooted in over a century of technological leadership.

A new Coinbase Institute white paper, Defending American Leadership: The National Security Case for Crypto and Blockchain,” explains how the U.S. government’s current approach to crypto threatens U.S. security. It also provides an analysis of how technology was critical to our national security in the past, and why crypto could have the same critical importance in the future. 

To understand why crypto and blockchain present a rich area of opportunity for expanding national power and, consequently, why the failure to embrace this technology presents a national security risk, it’s important to understand the utility of these technologies across industries. At its core, blockchain is a breakthrough technology that addresses a basic but important challenge: digitally transferring information or value without relying on verification by an intermediary. By removing the need for an intermediary, the blockchain has ushered in multiple use cases bettered by the technology’s efficiency, transparency, and accessibility. 

The transformative potential of technologies, such as railroads, automobiles, telecommunications or the Internet, seems obvious in retrospect, but at the time each came on the scene, they were called a fad or unfavorably compared to some other emerging innovation (often one that has been forgotten by history). The genius of historical U.S technology leadership is that it didn’t try to pick winners or losers. Instead, it took a welcoming posture toward innovation while managing risks, rather than attempting to set in stone old ways of doing things.

Right now, recognizing the enormous potential of crypto and blockchain―as well as the competitive advantages for first movers―U.S. adversaries and allies alike are embracing crypto. And no country has been as aggressive in promoting blockchain as China. Recognizing that the future direction of crypto and blockchain are difficult to predict, the country has hedged its bets with sizable investments in the next generation of “traditional” fintech, broader investments in blockchain, and a targeted push in crypto. Building on its already strong, if not dominant, positions in areas like 5G, global infrastructure projects and the entire lithium battery value chain, China has drawn an aggressive roadmap in recent years via its Made in China 2025 strategy, with stated ambitions to have the world’s most advanced blockchain technology by 2025.

If we continue to destroy―either by prohibition or neglect―the domestic crypto industry, the U.S. will likely find itself at a devastating disadvantage against other countries, including our adversaries, as the technology matures and becomes more important. Crypto is here to stay. It’s time for the government to create the regulatory infrastructure necessary for the technology to serve American economic and security interests before our adversaries turn it against us. The good news is that the nation’s history of economic freedom and commitment to fostering technological innovation provide a solid roadmap for rapidly building a formidable leadership position in emerging technologies.

This is part of an ongoing series about the intersection of crypto and national security.

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