Asheesh Birla is the GM of RippleNet at Ripple.
The U.S. government is failing us with regard to fintech and blockchain regulation.
Devoid of any regulatory framework in the past four years we’ve been operating in limbo when it comes to the development and advancement of crypto products. Innovators in the fintech and blockchain industries have the ability and vision to build products that solve real problems for everyone from individuals to large banks to governments, but without a clear path forward, these products are unable to grow and scale to their full potential.
Regulation shouldn’t be a guessing game. Since 2019, when the Securities and Exchange Commission declared that neither Bitcoin (BTC) nor Ethereum (ETH) are securities, the industry’s been at a standstill. Without clarity, blockchain innovation will be limited to just two coins — the industry is much larger than this. A lack of regulation stifles the immense potential that crypto and blockchain provide.
If we know the rules of the game we’re playing, we can keep doing what we do best: innovating.
A new administration presents a new opportunity for elected officials across the political spectrum to develop clear policies and regulations enabling banks, fintechs and corporations to custody and use crypto to improve efficiencies and to provide a better customer experience.
We can learn a lesson from recent history here. In 1991, we saw the passage of the High Performance Computing and Communications Act (HPCCA), a bipartisan effort led by Senator Al Gore and signed into law by President George H.W. Bush.
This legislation paved the way for companies like Amazon, eBay, Yahoo, Google and others to boom and made the U.S. an early internet leader. By 1993 we saw the introduction of web browsers, and shortly after, the start of the dot-com era in 1994 that cemented the U.S. as a symbol of innovation.
The browser changed everything. It’s created new jobs, new economic opportunities and new categories in technology that we couldn’t have predicted 30 years ago. In looking at the top 100 Fortune 500 companies in 1991, technology was barely a blip on the radar with IBM standing as the lone tech company. By 2020, it’s a drastically different picture, with the list completely dominated by technology giants like Microsoft, Apple, Alphabet, Facebook and Salesforce.
Technology companies in the top 100 have contributed close to three million jobs, with many leading in market value. Despite an unconventional year, we’ve continued to see successful technology IPOs like DoorDash, Snowflake, Asana and Palantir.
Products and services that we take for granted now like Google, the iPhone, Uber, Salesforce, Spotify, Postmates and more were made possible by the HPCCA. We now have another chance to create a bipartisan effort focused on crypto innovation, one with public and private sector support to ensure clear regulatory frameworks. Regulation will make it easier for innovators to create new products that keep the United States competitive with other countries and attract more investment.
There’s no disputing that the adoption of crypto and blockchain is on the rise. Major companies including PayPal, Square and Robinhood are leaning in to crypto and pushing it to the mainstream. With the validation from these brands, interest in the utility of cryptocurrencies and the ability of crypto to better serve businesses and their customers, continues to grow.
Leading crypto companies such as Ripple, Coinbase, Gemini, DCG and Chainalysis are currently based in the United States. However, unclear regulation will keep new entrepreneurs from innovating in the United States. While other countries move forward with defined regulatory frameworks, it’s possible that we will see new entrepreneurs and companies forgo setting up shop in the U.S. in favor of jurisdictions where the rules are clear.
If we know the rules of the game we’re playing, we can keep doing what we do best: innovating. We are only at the beginning — developers can build on open-source technologies, entrepreneurs can launch new companies and develop new products, and investors can invest in those companies.
We want the most innovative crypto and blockchain companies to be built and to grow here in the U.S., where they can create value and opportunities for U.S. citizens. Similar to the early days of the internet, we don’t know what the industry will look like in 5-10 years, but with flexible frameworks the opportunity is massive.
There’s a big opportunity for the Biden administration to influence new policies and new legislation and provide clear guidance that will accelerate innovation in fintech and crypto for many generations to come. The administration can:
Create a national digital banking licensing charter (similar to Singapore’s Digital Banking Charter), to streamline the process for fintechs to apply for crypto, lending and payments licensing. Today companies in the U.S. are left to apply state-by-state for licensing, which costs millions of dollars in legal fees and years to accomplish.
Define clear classifications for digital assets, derivatives (created via smart contracts) and stablecoins.
Create a bipartisan public and private sector group led by tech-savvy thought leaders such as Andrew Yang, to collaborate on landmark legislation that will do for fintech what the HPCCA did for internet companies.
Appoint an SEC chair that understands how to truly advance innovation while protecting consumers and the markets. The pro-innovation lip service we have been getting from this SEC is just that — lip service. Every crypto project this SEC has touched has ended up fleeing the U.S., in bankruptcy or left holding worthless tokens.
Regardless of how policymakers and regulators decide to approach the issues that our industry faces, we need to continue to work alongside the government to ensure that the rapidly growing number of people who use fintech and blockchain products continue to get the best-in-class solutions with appropriate consumer and market protections in place.
It’s clear that this technology is here to stay, and I hope that elected leaders will recognize the power that it has to effect massive financial industry progress. Similar to the HPCAA, smart regulation can both protect our consumers and markets while allowing proud U.S. companies to create life-changing innovations.