Despite last week’s announcement, there is a related risk that FATF appears unready to address: the future possibility that central banks will develop digital currencies and approve them as legal tender. In fact, many governments are exploring prospects for “central bank digital currencies” in the coming years. As FATF’s recommendations currently stand, such digital currencies would appear to fall under the same regulatory rules for conventional fiat currencies. However, the concrete appearance of a government digital currency would likely raise unforeseen questions and challenges. FATF and financial regulators around the world will have to keep an eye on this potential development, even if it remains distant for now.
Before the U.S. can do that, it first needs to do two things: One, the U.S. government should assess the status of blockchain technology development by key U.S. adversaries like Russia, China, Iran, and North Korea. Second, America should develop a National Digital Currency and Blockchain Strategic Plan that maps out ways to ensure that American firms, talent, and government agencies stay ahead of the potential cryptocurrency curve. Recently, U.S. Federal Reserve governor Lael Brainard expressed her confidence that the dollar will remain the world’s dominant reserve currency. Let’s hope such sentiments do not lead to complacency. If they do, the cat and mouse game could instead turn into the fable of the tortoise and the hare.
experimenting with them more frequently. By preparing now for terrorists’ increasing usage of cryptocurrencies, the U.S. can limit the ability to turn digital currency markets into a sanctuary for illicit finance. I will conclude my testimony today with specific recommendations for how the federal government and the private sector can address this challenge.
Lastly, the broader crypto space should not treat rogue regime crypto with ambivalence. Instead, blockchain tech influencers should “call out” crypto schemes that fund oppressive regimes. Just as responsible cryptocurrency enthusiasts know that ICO scams hurt crypto’s image, they should understand the risk of authoritarian crypto to tarnish the technology’s reputation. The fascinating thing about the crypto/blockchain space is that its story has yet to be written. It is important that when it does, it gets broadcast with the highest code.