To achieve stability and legitimacy, the crypto and digital currency markets are dependent on:
- Enhanced Security Measures: It is now clear that the real precursor to regulation for the legitimacy of this marketplace will be a solution to widespread cybersecurity incidents, fraud, ransomware, and staggering heists. The scale and severity of cryptocurrency heists (over the course of 2021) made the need for enhanced security abundantly clear. Much of the crypto marketplace encountered consequential cybersecurity issues in 2022 that will impact public adoption and invite increased regulatory pressure. There is also a middleware ecosystem emerging in the form of marketplaces and exchanges that are based on Web2 technologies that are being deployed without proper consideration for cybersecurity best practices.
- Regulation (or Overregulation)?: It has been the conventional wisdom that “traditional” regulation would be the inevitable fate of cryptocurrency. The U.S. Government does not have a great track record of understanding its role (if any?) in disruptive innovation and technology. The Catch-22 here is that any efforts to thwart innovation in this space could create durable national security risks in the future if the U.S. loses innovation advantage by driving key projects to external domiciles or ceding control of critical infrastructure to foreign governments.
- Global Crypto and Digital Currency Adoption Rates: The economic benefits of the U.S. dollar serving as a global reserve currency could be diminished with the widespread adoption of Bitcoin as a store and exchange of value. Several nation-states have or are looking to recognize Bitcoin as a currency or as legal tender and several U.S. state initiatives are also underway. The secondary challenge here for the U.S. government is ensuring that any inevitable movement to a new reserve currency model is tied directly to the U.S. innovation ecosystem.
Following is a compilation of our 2022 series of posts on crypto and digital currency initiatives from around the globe, all of which are officially sanctioned to enhance national competitive advantage (in the event crypto overtakes the US dollar as the global reserve currency). The cumulative adoption rate of state-sanctioned crypto and digital currency legalization and regulation may still (against the odds of security issues and the vagaries of early efforts at regulation) propel this innovative system for value creation, storage, transfer, and exchange as an official global currency standard.
- El Salvador: “…this is not something the World Bank can support given the environmental and transparency shortcomings…”
- Panama: Panama has followed El Salvador’s lead in Central America.
- Ukraine: Last October in Ukraine, the Virtual Assets Bill was vetoed by President Volodymyr Zelenskyy. In February 2022, the Ukrainian parliament voted in favor of the bill that legalizes all cryptocurrencies and virtual assets.
- Argentina: “…the cryptocurrency ecosystem is still operating under the radar of regulators, which bodes well for crypto’s ability to innovate…”
- Russia: “…Russians are switching to crypto as a result of the chaos caused in their daily financial lives…” brought on by the war in Ukraine.
- India: “…challenges like crypto cannot be tackled by nations in isolation…”
- China: We set our sights on China, a country that has a markedly different policy approach to the global ascendance of bitcoin, cryptocurrency, and CBDC.
- Project Hamilton: The Federal Reserve Bank of Boston and The MIT Digital Currency Initiative: We provide an analysis of the major central bank digital currency (CBDC) initiative in the U.S., Project Hamilton, which is a technical collaboration between the Federal Reserve Bank of Boston and The MIT Digital Currency Initiative. The Biden Administration is set to release an Execute Order (EO) articulating national security concerns associated with Bitcoin and other cryptocurrencies. Project Hamilton is a major applied basic research project which informed some of the actionable and directional components of US policy.
- U.S. Crypto, Digital Assets, and National Security Policy: We evaluate crypto and digital asset initiatives announced via executive order in March of this year.
- 9% of the World’s Cryptocurrency Computing Power is in Texas; Crypto Miners Power Down During Heat Wave: This post is a really interesting convergence of a few OODA Loop research vectors: crypto miners, drought/heat wave conditions, energy policy, risk awareness, and decision-making.
- Colombia: In this post, we set our sights on Colombia, a country that has aligned its blockchain deployment to address the recent painful, war-torn history fueled by the vagaries of land rights and ownership (which have an even longer historical precedent in the South American country).
- Vietnam: The next country, Vietnam, ranks #1 in the primary research report on which we have based our list of countries to survey: the 2nd iteration in October 2021 of Chainalysis’ Global Crypto Adoption Index. Vietnam is also the home to the blockchain-gaming site Axie Infinity, which was part of the $600 Ronin Network Crypto Heist attributed to North Korea-affiliated Lazarus Group.
- Pakistan: The next country, Pakistan, ranks #3 in the primary research report on which we have based our list of countries to survey: the 2021 Chainalysis’ Global Crypto Adoption Index. The fate of cryptocurrency and digital currency in Pakistan is playing out right now in a battle royale between the State Bank of Pakistan, which has called for banning crypto entirely, and industry leaders, who advocate for regulation as sophisticated as those applied to other financial markets in the country.
It should go without saying that tracking threats are critical to inform your actions. This includes reading our OODA Daily Pulse, which will give you insights into the nature of the threat and risks to business operations.
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