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What Will The Federal Government Do In Response To The Rise of Cryptocurrencies?

From my perspective, the innovations coming out of the cryptocurrency community occur at a rate about three times faster than any other tech industry.  Meanwhile the US government generally adopts technologies about three times slower than any other industry. So the government is generally nine times slower than the cryptocurrency community in terms of tech adoption.

That is just a rough approximation but I wanted to let you know my views. Since the government is starting off way behind in tech adoption it means the executives around the federal ecosystem will generally have less experience and awareness of the true nature of innovation in cryptocurrency. That has a negative impact on their inputs to policy, which makes it more important for non government experts to influence policy here.

There has been significant influence from outside government on these issues. As we identified in our C-Suite Report, the rise of a new found political consciousness by the cryptocurrency community has resulted in a new force in the policy arena. We are now seeing some results of this influence. Here are two big examples of that influence:

The first was the 9 March 2022 release of the White House Executive Order on Ensuring Responsible Development of Digital Assets. The community knew this EO was coming and many speculated that it would be full of foolishness. Many in the cryptocurrency community worked hard to get good info into government by multiple paths, including writing opinion pieces, contacting congress and directly engaging with executive branch leaders. And many in government worked hard to reach out to trusted experts in cryptocurrencies and new blockchain technologies. Drafts of the EO itself was shared and iterated several times across government and with thought leaders from industry. The result was that overall the EO was pretty balanced (the EO was consistent in understanding the issues Matt Devost outlined in his February 2022 post titled Is Bitcoin a National Security Risk). The EO read as a well reasoned expression of many issues of cryptocurrency that the federal government needs to study, and it tasked multiple agencies with studying and providing coordinated plans for action. It also tasked the Attorney General to advise on whether changes to laws might need to be proposed. Most required studies will occur over a 6 month period. It was good seeing the Executive Order recognize the importance of innovation in cryptocurrencies including the need to innovate to protect the economy and for national security.

The second big federal government change we noticed in March was with the personal statements by the Secretary of the Treasury Janet Yellen. Yellen has long been an outspoken critic of Bitcoin and all other cryptocurrencies. She has spoken out on them when she was the Chair of the Federal Reserve Board, when she was a private citizen, during her confirmation hearings for her Secretary of Treasury position and many other times. She criticises Bitcoin as being primarily used for illicit purposes. She has also historically trashed it by repeating unfounded accusations of it having significant environmental issues. In our view both of those complaints were always false. There is certainly crime and a need for reducing that, but it is an incredibly small amount of the overall cryptocurrency use. And the energy consumption issue is one that needs to be compared to the system it replaces, which consumes far more energy.

Secretary Yellen has now changed her tune. In an interview with CNBC she can be clearly seen as switching her view and supporting cryptocurrency. She says it has grown by leaps and bounds and is something she realizes many Americans are thinking about and investing in. She says she still says there are valid concerns around consumer and investor protections but she sees the benefits and sees the need for healthy innovation. This is really great to see. It can be very hard for senior leaders to keep open minds and clearly she did and has shifted her position to the positive.

Watch her full interview at:

https://www.youtube.com/watch?v=2Y0A8PvaloI

 

We see both these issues as positive regarding federal government perspectives and actions.

We noticed a three other non government developments of note, they are important enough for us to raise to your attention and may also be examples that inform the studies directed by the White House Executive Order so worth a review.

  • Exxon has been evaluating ways to conduct Bitcoin mining using natural gas that is currently being wasted. They currently have a pilot program being run in North Dakota that powers bitcoin mining and is considering expanding the program to other countries and then globally. Other oil producers are watching this closely. This could be a great way to use natural gas that is currently being lost in the production process and would also be profitable for Exxon and better for the world ecology.
  • The Government of Ukraine has worked to accept cryptocurrencies from any country, organization or individual who would like to donate to their efforts. The Web3 architecture they put in place to do so was built by some of the best in the cryptocurrency community and can securely accept donations from a wide range of cryptocurrency tokes and also from fiat currency. And this is done with the full support of the Ukrainian government and their financial infrastructure, and is being used to rapidly acquire things that can make a difference for Ukrainian defenders. For more and to donate see: https://donate.thedigital.gov.ua 
  • Goldman Sachs, another institution that has historically been opposed to anything associated with cryptocurrencies, has moved so significantly into the crypto world that they are touting their mastery of the subject at the top of their website. Here is a screen grab showing how proud they are for being on the bandwagon now:

 

We will continue to track the developments in innovation around cryptocurrencies. To ensure you are on distribution for future reports sign up for the OODA Daily Pulse.

 

OODA network members can also access these additional resources on Web3 including insights into how to reduce risk and inform business strategies. Research and reporting of interest includes:

What CEOs Need To Know About Bitcoin: Including potential new business models to consider  A Cambrian Explosion in innovation in Bitcoin related products and services is underway. Here is what the business leader should know about this revolutionary transformation of the global financial sector.

The Cryptocurrency Incident Database OODA analysts track every major cybersecurity incident and seek insights into root causes that can inform defenses.

Reducing Risk To Cryptocurrency Projects by Red Teaming We provide insights on prioritizing defenses of cryptocurrency projects based on our years of experience in red teaming.

Is Bitcoin a National Security Risk? How might Bitcoin be framed as a national security risk?  As national security technologists, here is our take on where the government is likely concerned.

The Past Present and Future of DeFi  Here we capture insights from two of our most popular OODAcasts on the cryptocurrency revolution, one with crypto pioneer Bradley Rotter and one with author of “The Infinite Machine” Camila Russo.

Bitcoin and Ethereum and the Metaverse  Jahon Jamali is one of the great explainers of the nature of the crypto revolution and provides insights here into the nature of the coming changes.

What Will The Federal Government Do In Response To The Rise of Cryptocurrencies? All businesses and citizens should understand the importance of improving policy in this domain, but we also need to be cautious about over regulating or passing foolish rules that do more harm than good.

Disruptive and Exponential Technologies We track the rapidly changing world of technology with a focus on what leaders need to know to improve decision-making. Gain insights into the future of tech in a way that enables optimized action. We provide deep insights into Blockchains, Artificial Intelligence, Machine Learning, Cloud Computing, Quantum Computing, Security Technology, Space

 

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Bob Gourley

Bob Gourley

Bob Gourley is the co-founder and Chief Technology Officer (CTO) of OODA LLC, the technology research and advisory firm with a focus on artificial intelligence and cybersecurity which publishes OODALoop.com. Bob is the co-host of the popular podcast The OODAcast. Bob has been an advisor to dozens of successful high tech startups and has conducted enterprise cybersecurity assessments for businesses in multiple sectors of the economy. He was a career Naval Intelligence Officer and is the former CTO of the Defense Intelligence Agency.