As the challenges to the global monetary system posed by the rise of digital currencies have multiplied, so have the questions about how the United States plans to respond. Now there are some sort-of answers. Yesterday, the Treasury Department announced a new framework for international engagement on digital assets—as mandated by President Joe Biden’s March executive order on crypto. Those looking for the Biden administration to signal a clear vision, however, will have to wait. Treasury’s 2,400 word release detailing the framework describes its ongoing efforts to do things through multilateral institutions like promote development of central bank digital currencies, lower the costs of cross-border payments and crack down on money laundering. But the release is full of statements like: “We will work to ensure that we learn about and can take thoughtful action to appropriately mitigate risks to financial stability or systemic risk,” and “The United States will also more actively develop, with key allies and partners, a vision for digital assets in line with U.S. values and objectives.” The tone alone offers a pretty good illustration of the culture clash between digital-currency mavens and nation-states. Crypto’s most ardent backers have a tendency to express themselves in sweeping manifestos and dramatic soundbites. “Bitcoin is Venice,” declares one such manifesto, which goes on to explain that “Bitcoin is gravity” and “Bitcoin is Halal.” By that standard, you could call the Treasury statement a triumph of bureaucratic vagueness. But that vagueness offers a window into the current state of, and the prevailing uncertainty around, U.S. policymaking. There are a few things going on here: 1. “Digital assets” is a broad category. The federal government wants to encourage some applications — like central bank digital currencies — and discourage others, like ransomware payments. If you were to ask an executive agency, “What should we do about the internet?” it would also have different things to say about different aspects of the technology. 2. Developments in digital assets are moving at a very rapid pace, and touching a lot of areas of concern to the government. This seems to call for doing something decisive, quickly. But in fact, things are happening so quickly that it may be premature to act, especially if an effective response requires coordination between many national governments. Should the government, say, move more aggressively to quash nation-state adoption of crypto-currencies? It’s not clear whether that will develop into a pressing issue, or just fizzle out on its own. So, there’s a lot of consultation and observation going on—and a policy that looks a lot like "hurry up and wait," in many more words. 3. Crypto is highly political. The ultimate direction of U.S. policy will likely be dictated in large part by the outcomes of elections and fights in Congress, whose job, after all, is to make laws. That places limits not just on Treasury’s framework, but the entire executive branch process outlined by Biden’s order. It’s worth noting that the phrase “U.S. values” appears six times as the guidestar of U.S. policy in the Treasury statement. But what are those values, exactly? Monetary policy has posed fiercely debated, perpetually unresolved questions about American values ever since Thomas Jefferson and Alexander Hamilton squared off over the First Bank of the United States. And more so than at most times in U.S. history, the definition of American values are hotly contested right now. How do policymakers weigh trade-offs between personal privacy and combating terrorism? U.S. financial supremacy and national sovereignty? In short, which "U.S. values," will take precedence in U.S. policy on digital assets? We, and the Treasury Department, will have to stay tuned.
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