Emotions prompting policy measures against the crypto sector, driving innovation and investment away from the US.
The Role of Emotions in Shaping US Crypto Policies
It appears that feelings such as resentment and humiliation are playing a significant role in shaping US policymakers’ recent decisions regarding the cryptocurrency industry. This has raised concerns that the US may lose its competitive advantage in the field of blockchain and digital assets, as regulatory actions seem more focused on vengeance than on well-founded judgment. The current trend of politicization in US cryptocurrency policies shows a series of enforcement measures taken against prominent industry players, including Kraken, Coinbase, Paxos, and Binance. These actions can be interpreted as a form of punishment for Sam Bankman-Fried, the previous founder of FTX, whose company’s sudden downfall in November caused a massive upheaval in the crypto landscape.
Sources with ties to Washington D.C. have disclosed that officials in the Biden Administration and legislators from both major political parties felt disgruntled and humiliated by the FTX fiasco. Before the company’s collapse, politicians had received over $74 million in political donations from FTX and had established connections with Bankman-Fried. Many politicians were drawn to his commitment to “effective altruism.” While there is a general agreement that stricter regulation is necessary in the wake of the FTX scandal, many view the US government’s response as arbitrary and excessively harsh.
The method employed by US authorities seems to prioritize regulation-by-vengeance over regulation-by-enforcement. This has resulted in millions of investors, employees, and developers in the cryptocurrency industry bearing the consequences of the actions of a handful of dishonest individuals. Moreover, the US risks forfeiting its influence over the trajectory of blockchain technology, as other developed countries are not adopting such a confrontational stance toward the sector. There is a growing conviction that advancements in digital assets and blockchain technology will migrate to more crypto-friendly locales, potentially placing the US at a disadvantage in terms of investment, entrepreneurship, and technological leadership.
Prospects for US Cryptocurrency Policies
Despite the present vindictive atmosphere, perhaps this emotion-driven strategy will eventually change via a more measured policy-making process. Nevertheless, the harm inflicted on the US’s ability to attract cryptocurrency investment and innovation could be substantial. Industry leaders have cautioned that a mass exodus of cryptocurrency businesses from the country might be imminent.
The absence of clear legislative guidance has left many cryptocurrency businesses feeling that continuing to operate in the US is too perilous. This notion has been reinforced by the seemingly orchestrated regulatory measures and the release of a harsh White House report on the industry. Additionally, Senator Elizabeth Warren’s (D-Mass.) endeavor to assemble an “anti-crypto army” has done little to assuage concerns.
Adopting Lessons from Blockchain Governance Models
The impact of human emotions on crypto policy decisions underscores the significance of well-defined, unassailable governance rules. The US Constitution, for instance, emphasizes the separation of powers, which aims to safeguard society from the errors or corruption of its leaders. In a similar vein, blockchain technology offers a decentralized system for managing money, assets, and information that does not depend on “trusted third-party” intermediaries.
While it is worrisome that the US may be falling behind in the race for cryptocurrency innovation, the technology itself could help impose a self-regulating force on the political system. By providing an alternative to conventional financial systems, blockchain technology has the potential to pressure politicians to refine their decision-making processes and cultivate an environment more supportive of innovation and investment in the cryptocurrency domain.