If it isn't already.
Cryptocurrencies and blockchain technologies are now firmly entrenched in 21st-century economics and finance. Sure, they are entrenched in the fringes. They are still in no way close to becoming practical and feasible legal tenders. However, the industry is only going to grow bigger from hereon. And it's come a long way since the launch of the Bitcoin network back in 2009.
You can either embrace or dismiss it, but you cannot ignore it. And countries across the world are deliberating about what could possibly be the future of financial technology. One country is poised to become a superpower in the field. Surprise, surprise...it's the US of A.
There are two strong reasons for them occupying the pole position. The first has to do with developments and measures taken in the US specifically regarding cryptocurrencies. And the second has to do with their larger comparative advantage as the global leader in technological innovation and economics.
Recent policies have opened up way for the expansion of this frontier of financial technology. The cryptocurrency market has been subject to multiple cycles of boom and busts, and bubbles in its nascent history (2011, 2013-2015, 2017-2018, and 2021-2023). When the Securities and Exchange Commission (SEC), the US federal body regulating the investment market, allowed the trading of Bitcoin-backed exchange-traded funds (ETFs) on the New York Stock Exchange in 2021, it was institutional support for exposing Bitcoin to a larger pool of investors and capital. Linking the cryptocurrency market indirectly with the stock market demonstrates the interest and acceptance of crypto as a legitimate financial space, one with potential.
While the SEC is monitoring the cryptocurrency market and deliberating what their next steps should be, President Biden's executive order on 9th March 2022 was a landmark policy decision reiterating the US government's interest in digital currencies (which included cryptocurrencies amongst other instruments like centrally bank digital currencies). The executive order seeks to support the development of digital currencies and curb their illicit use.
The Biden administration is also woefully aware of the fact that countries around the world are looking into crypto and digital currencies; the fact sheet released by the White House regarding the executive order stated their intent to keep the US as the global leader in this financial-technological space.
These steps demonstrate American foresight, vision and intent to continue dominating the world of cryptocurrencies.
The US by no means is the only country focused on crypto. Japan and South Korea were some of the early adopters of cryptocurrencies and blockchain in the world, and also legalize Bitcoin as a legal tender, like most of the developed world. Switzerland is the home of Ether the second most popular currency, backed by the most popular blockchain tech. - Ethereum. Countries ranging from Vietnam, Australia, Nigeria, Ukraine and more are seeing rapid adoption of cryptocurrencies and blockchain technology. There are cryptocurrency exchanges popping up across the world (from the US, the UK, to Japan, Singapore and South Korea).
Closer home, the Chinese effectively made cryptocurrencies illegal on home soil by declaring all transactions to be illicit back in 2019, despite having a thriving market hitherto.
India has seen massive rates of crypto adoption and the proliferation of blockchain research. A Statista study speculates India to account for 156 million crypto users by the end of 2023, as per a CNBC report. However, the government still does not recognize any cryptocurrency as a legal tender. They do see it as some juicy low-hanging fruit to tax as investment instruments though. The recent tax and compliance laws regarding cryptocurrency investment and transaction recordkeeping do indicate that crypto and blockchain have deepened their institutional roots in India, and the government sees their potential.
The same CNBC report also points out that the actual volume of value being traded in cryptocurrencies in India is expected to remain significantly low at $3.3 billion for 2023, a mismatch given the higher number of users. The top position, in terms of the expected value of transactions of crypto trade, is occupied by, surprise, surprise... the US - at $22.7 billion worth out of the global total of $43 billion for the year 2023.
Therein we come to the second factor that positions the US to become a crypto superpower. To employ a Ricardian analysis of comparative advantage, the country has an outsized advantage by virtue of being the dominant economy in the world. Bitcoin accounts for the most dominantly traded (or invested) cryptocurrency, at around 44% of all crypto trade. Ether is a distant second at around 18%. The US has had a head start since the very inception of the cyrptocurrencies and blockchain technology, and it affords them a comforable scaffold to continue investing and innovating.
The US may not have the most number of stock exchanges, but they certainly have some of the most well-known - like Coinbase and Kraken. The large volumes of transaction occuring through them, once again puts them in a favourable position to leverage their clout in the cryptospace. Silicon Valley's general dominance of global technological research and innovation is yet another factor that feeds into the potential for them to remain at the cutting edge of this highly technical and avant garde space.
All this is to say, is that for the subsector of the cryptocurrency space, the broader comparative advantage in technology and economics enjoyed by the US over the rest of the world is going to yield a signficant positive externality - when it comes to developig the crypto space further. And now, with a more deliberate and decisive policy intention in the Biden administration's exectuive order of last year, their crypto hegemony appears to be a foregone conlcusion.
At least for now.
