TL;DR: As other countries embrace crypto, the U.S. must enact smart crypto policy to fortify our national security. Without renewed ambition and commitment to U.S. technological leadership, our place as a global leader is at risk. Policymakers considering crypto should heed the lessons learned from our failure to embrace semiconductors as a critical technology.
Crypto is the technological innovation that will usher in the next generation of transformational change in the financial system. Major use bases abound:
- Stablecoins allow for quicker and cheaper settlement times when making payments around the world
- Major banks like JPMorgan are using new decentralized protocols to more effectively execute traditional financial transactions
- Decentralized ID can allow every person who uses the internet to more easily control their online identities, which are needed to interact with a range of online services
- UBS has started issuing digital bonds that settle instantly on the blockchain
- Broadridge now conducts $70 billion of repurchase agreements every day via blockchain technology
- Asset issuers are just beginning to scratch the surface when it comes to tokenizing real world assets
- But the blockchain isn’t just about finance. The U.S. military and national security personnel have been exploring blockchain uses in national security for many years:
- In 2017, the Defense Advanced Projects Agency (DARPA) approved research into blockchain technology, with a primary focus on cybersecurity and data integrity and developing a secure messaging platform.
- DARPA is also exploring a blockchain-protected supply chain to ensure the integrity and authenticity of components along the chain of custody, including funding companies like DUST Identity, which creates unique, unclonable digital identities to physical objects and is cost effective to use at scale.
- The U.S. Air Force has not only provided funding for, but also has multiple contracts with SIMBA Chain using blockchain to manage cash flow and streamline operations.
- The U.S. Navy has commissioned a blockchain system for tracking critical weapons. DARPA is in the process of assessing risks and vulnerabilities – but its many years of research indicate a recognition of the potential of blockchain to address key military issues including logistics planning, supply chain, secure messaging, and data security.
While the use cases for crypto and blockchain are becoming more advanced and varied than they have ever been, the U.S’ regulatory approach to the technology is causing it to lag behind in adoption relative to other countries around the world. This is something that all policymakers who care about national security should pay attention to. As explained in last week’s series on crypto and national security, the U.S. has regularly leveraged technology to advance our national standing. But, at times, it has also dropped the ball and failed to embrace technologies that have become critical.