US policymakers are grasping what the crypto revolution means, and so is China, in its own way. Europe, on the other hand, has not yet grasped it and is therefore losing out. Nothing shows this more clearly than a hearing before the United States Senate, which would be unthinkable on our continent.
I think it’s quite nice to be a European instead of an American. But sometimes you do get envious when you look at the US, and sometimes you are overcome with naked horror when you realise how much at A***** we Europeans are.
One occasion to feel this way is the video of a recent hearing in the United States Congress. In the session, which lasted more than four hours, several important representatives of the crypto industry take questions from the senators.
If you now realise that there was also something like this in Germany, that the Bundestag already held a hearing on blockchain and so on in 2018, you are on the right track to understanding the horror. Back then, in 2018, three professors, a philosopher critical of Bitcoin, a CEO of a startup of the Burda media group and the board of the Bitcoin Federal Association were invited to the Bundestag. Why these “experts” were there was completely opaque. The reason for their invitation had almost nothing to do with competence and economic relevance, and a lot to do with party political proportionality. The Bundestag had no intention of really finding out more.
The situation is quite different in the “House”, as the Americans call Congress. No professors or philosophers sit there, but the CEOs of some of the world’s most important crypto companies: Jeremy Allaire from Circle, Samuel Bankman-Fried from FTX, Brian P. Brooks from Bitfury, Charles Cascarilla from Paxis, Denelle Dixon from the Stellar Foundation and Alesia Jeanne Haas from Coinbase.
The selection of experts alone says a lot about location and politics. Neither in Germany nor in the EU are there comparably important crypto CEOs. That alone is an indictment of the location. But even if there were, politics would not be in a position to invite them. This is shown by the selection of “experts” at the Bundestag hearing.
“How can we help you? “
The course of the hearing is also impressive: the senators have an informed, constructive and, above all, eye-to-eye discussion with the CEOs.
Again and again they inquire about the hardships and torments the industry has to suffer at the hands of the regulators. Several senators concede that regulation by the many different authorities is too complex and excessive. Politicians seem genuinely interested in learning how they can make life easier for companies.
In my eyes, such a constructive, pragmatic and realistic basic attitude is neither to be seen in the German government – our new chancellor already declared years ago, in complete ignorance of the crypto markets, that he would not tolerate private stablecoins – nor in the EU.
You could sketch the difference something like this: In the US, policymakers see strong crypto companies as an asset – a resource that must be guarded, nurtured and also courted so that the US remains the innovation leader in this market. Thriving companies create thriving tax revenues, and when US companies lead internationally, the US leads internationally.
In Europe, crypto companies are seen more as a burden to be regulated and educated. Perhaps like a pet that you never wanted, and now you have to make sure that it doesn’t scratch your mother-in-law’s calf or run into your hyacinths. Sometimes they pay lip service to not wanting to prevent innovation, but in the end they prefer to drown the industry in regulation.
But that is more of a side issue. It’s not just about the form – it’s about the content. And that could have dramatic consequences for Europe.
“I think there is a great opportunity in this, and it is right in front of our eyes. “
Crucially, politicians in the US have realised something crucial with this hearing at the latest. Namely this: Stablecoins by free market players are the best thing that has ever happened to the dollar.
This is evident in several questions and answers. For example, at around 1:29:00, Senator Luetkemeyer, addressing Circle CEO Jeremy Allaire, states that he is very concerned that the dollar will lose its global dominance. This would pose a great risk to the US, to the economy, to prosperity, to the budget. The concern is not unfounded, as Russia, China and also India are increasingly trying to become independent of the dollar, be it in the compilation of currency reserves, be it in international trade.
Allaire, who chairs the dollar stablecoin USDC as CEO of Circle, responds with good news: Blockchains are spreading globally, and the dollar, as a stablecoin, is also already in this market, he says, and is becoming the global digital currency of the internet, entirely without the help of the central bank FED. “I think this is a huge opportunity, and it’s right in front of our eyes.” Circle, he said, wants the dollar to be the dominant global currency and is also working closely with national authorities to achieve this. Taking a side swipe at China, he promises, “This allows the United States to compete with other countries that are nationalising this technology and using it for surveillance. “
Similarly, Senator Barr, at about 1:40:00, also addresses Allaire. He asks what advantage a private dollar stablecoin has over a digital dollar issued by the FED. Allaire explains that stablecoins are already operating and growing in the market. A digital dollar has to be decided, developed and operated. Stablecoins already exist and are flourishing. They are, Allaire continues, formed on an open internet technology, whereas a digital FED dollar is a closed system that can probably never be as open and widely accessible as a stablecoin.
Barr then expresses his concerns about China’s progress on a digital currency. He fears that the US will lose room for manoeuvre as a result and that the dollar will lose its status as a global currency. Allaire can reassure him: The dollar is already winning the race to be the leading currency on the internet, he says. “Stablecoins are doing trillions of dollars in transactions, while the Chinese digital currency has done just $10 billion … the United States is winning, and this has the potential to continue to grow rapidly, to the benefit of the government, the economy, households. “
The Euro on its way to geopolitical irrelevance
With these very clear words, Allaire is apparently preaching to the choir. Stablecoins will not only save the dollar from losing its status as a world currency – they will strengthen that status. The US government does not have to do much at all. All it has to do is ensure that private companies find the framework conditions to create stablecoins.
It’s actually quite simple and obvious, but apparently so difficult that policy-makers are only grasping it in the US.
This does not bode well for the euro. Neither do the markets have a serious interest in euro stablecoins – what’s the point if you have dollars? – nor are European politicians willing to create the necessary conditions. Instead, they are preemptively throwing a spanner in the works of stablecoins, which do not even exist yet. No wonder that only strangely screwed-up, completely closed pseudo-stablecoins are emerging in the EU, which are either content with niches or are (rightly) rejected by the market.
In China, stablecoins have also been understood to some extent – but judged as a threat. Instead, China is vehemently pushing its own government-issued digital currency. The Communist Party has, after all, understood that the digitalisation of money is necessary and that there are only two options: Either a privately issued stablecoin or a “Central Bank Digital Currency” (CBDC). Freedom or control, economy or state. China has decided – Europe not yet.
Have you ever heard of the digital Yuan that China is experimenting? stablecoin ecny cryto blockchain futureofmon pic. twitter.com/KfGnciFclD
– Nam Dinh (@namnhutdinh) December 4, 2021
If one were to sum up the hearing from a European perspective in one formula, it would be this: The euro is on its way to geopolitical irrelevance, and in all likelihood it is already too late to change this. In the future, we will probably not only use payment systems operated by US companies – as we do today with credit cards and PayPal – but currencies from the hands of US companies right away. We will be completely dependent on players who are beyond our control.
But perhaps there is a third way: if one has the alternative between a Chinese state coin and a dollar stablecoin, one should perhaps choose the third option: a stateless, free currency. Bitcoin, for example.
Our governments are obviously not in a position to go down this path. But we all are.
