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In the next 5-10 years, sovereign and non-sovereign global digital currencies will proliferate, and billions of people can use it through their mobile devices; in addition, a new set of Internet-based global capital markets based on digital assets will emerge. If regulators implement the wrong regulatory measures, there will be serious financial and legal consequences, and it will also have a huge impact on the competitiveness of US encryption companies on a global scale. Without forward thinking, U.S. crypto companies will be left behind. Congress should consider new laws to protect consumers, rather than using a century-old definition to thwart innovation.
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01 The world in the next 5-10 years: Sovereign and non-sovereign global digital currencies will proliferate
When it comes to the development trajectory of digital currency technology, I am often asked what the world will look like in five to ten years. If policymakers, regulators, and the rest of the industry can successfully collaborate, we can solve many of the deep-seated problems in the financial system.
Here, I want to briefly outline the profound changes that digital currencies can bring about in the next decade, which will benefit people and businesses in the United States and around the world:
There will be a proliferation of sovereign and non-sovereign global digital currencies, accessible to billions of people from their mobile devices. People will also become more accustomed to private currencies and public currencies, and this combination will become ubiquitous. The global basket of currencies will develop rapidly and become the first choice for liquidation and value storage.
Payment and value exchange will be commoditized and become free services on the Internet, just like the free sharing of content and data and online communication on the Internet today. In this case, hundreds of billions of dollars in value could end up being added to the real economy, as individuals and businesses no longer need to pay middlemen, which in turn stimulates more economic activity among people around the world.
In the future, a new Internet global capital market based on digital assets will emerge. We believe that the capital market will also become a multilateral Internet market covering business, content, advertising, transportation and other industries. Internet-based marketplaces can support an extremely diverse global community of suppliers and buyers, from individuals to large businesses, with incredible choice and access. Our capital markets will become very much like e-commerce platforms like Amazon and Alibaba, or Google advertising platforms, rather than the current New York Stock Exchange or Nasdaq. In this case, the new capital market will open up a new capital formation model for global enterprises, and at the same time, people around the world will store value in a new way and invest in those companies that really produce value.
The five points mentioned above will be realized within ten years, driving us towards a new business and financial architecture in the 21st century, providing greater economic opportunities for all, and improving our ability to deal with financial challenges and risks in the digital age.
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02 Overview of digital currency categories: What kind of world do we need to regulate?
non-sovereign digital currency
Many blockchains with native digital assets can provide a decentralized, private, and secure digital currency.
In addition to Bitcoin, there are many blockchains that aim to compete with Bitcoin by improving speed, scalability, security and privacy features, such as Ripple, Litecoin, ZCash, Bitcoin Cash, BSV, Monero and newer assets Grin.
blockchain platform
The developers of these projects almost all share a common belief: to build a non-sovereign, secure, private value store and transaction tool. These projects also apparently create a fixed or highly predictable money supply. These attributes make digital assets more attractive than fiat currencies, gold, and other monetary commodities. Digital currencies are beginning to emerge in the face of global economic volatility, heightened nationalism, currency manipulation, and the risks of trade wars.
blockchain platform
The most well-known and popular blockchain platform is Ethereum. Other well-known platforms such as EOS, Tezos, Tron, NEO, Cardano, and Algorand, the competition in this field is becoming more and more fierce. The recently proposed Libra will also be a more distinctive blockchain platform.
The scope of these blockchains is broader than pure digital currencies, and they hope to provide a platform on which various applications and financial assets can be built. In some respects these platforms represent one of the infrastructure layers of a new Internet architecture that will provide means of storage and exchange, facilitate transactions, and enforce contracts in a decentralized, tamper-proof, and private manner.
The digital assets generated on these platforms will operate as digital commodities, often referred to as gas fees, which are used to pay for infrastructure services provided by the platforms. Just like oil and gas are the products that drive the foundations of the industrial economy, these blockchain-based digital commodities will become the fuel for digital commerce in the 21st century.
One of the most important functions of these platforms is to provide a way for developers to create digital assets, often referred to as tokens, which are attached to code called smart contracts. ” can enable and enforce characteristics, behaviors or economic incentives associated with tokens. This ability to generate tokenized digital assets is the most impressive innovation in the modern history of finance, economics and Internet products, and is an important classification in topological digital assets.
Tokenized digital assets
Among the more than 2,300 digital assets open to the public, a large part are issued on popular blockchain platforms like Ethereum. Some examples of tokenized digital assets are:
-New decentralized infrastructure services such as storing data and content, sharing files or streaming and encoding video.
-A new identity infrastructure that can provide people with the means to control their data and private identity information.
- Can reward and incentivize content creators, publishers and end users of content services and games.
- Development of purely digital financial contracts in code, including borrowing and lending in tokens, tokens that provide voting and governance functions, and tokens that provide access to underlying royalties and revenue streams.
-Tokenize suitable physical assets, such as real estate, property, and high-end art, to open these illiquid and scarce asset classes to global investors.
stable currency
These digital assets cannot be easily classified as securities, commodities or currencies. In fact, one of the biggest benefits of digital assets is that they can have the characteristics of investment contracts, utility and payment currency at the same time. But this also brings new and complex problems for financial regulators, but it also creates incredible opportunities for project companies seeking digital asset innovation, so I think this will be the most important policy and regulatory issue facing the industry one.
stable currency
Today I will focus on fiat and asset-backed stablecoins, sometimes fiat tokens. In addition to the focus on Libra, the rapid development of emerging digital assets similar to USDC (USDC), and the multi-party proposals for central bank-issued or regulated digital currencies around the world indicate that legal tokens are also worthy of attention.
In recent history, this fiat currency has been mostly used in the trading of digital assets and exchange markets to support trading strategies (hedging and arbitrage). Quite authentically in the crypto exchange market, traders need to be able to easily hedge volatile currency positions, and stablecoins would be a tool for this purpose. The advantage of stablecoins over USD in traditional bank accounts is that they can be transferred at the speed of the internet and have the same security and transaction permanence as other digital currencies, which can help reduce or even completely eliminate counterparty risk.
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03 The United States should not use 100-year-old laws to regulate 21st-century technology
On a global scale, each different government and regulatory agency has taken very different measures, which will have different impacts on the development of the encryption industry. In the United States, due to the lack of clear regulatory rules, some laws do not consider or cover digital assets, causing American encryption companies to lose many opportunities, and even affect consumers, enterprises, and even the entire national economy in the future.
For example, the U.S. Securities and Exchange Commission is still using the federal laws of the last century to regulate technology in the 21st century. The judgment mark for determining whether encrypted assets should be regulated as securities turned out to be the Howey test formulated by the Supreme Court in 1946. If crypto assets are considered securities, then the SEC and the team behind it are obligated to regulate them.
If regulator officials and employees implement the wrong measures, there will be serious financial and legal consequences, and it will also have a huge impact on the competitiveness of US encryption companies on a global scale. Without forward thinking, US encryption companies will become backward. Congress should consider new laws to protect consumers, rather than using a century-old definition to thwart innovation. While the U.S. has been trying to address these issues, it has fallen behind foreign (mainly Asian) crypto firms, which have begun to dominate the market, while U.S. firms have lost considerable market share.
Regulatory uncertainty, and even some regulatory measures that hinder innovation, will cause many digital asset projects and companies to flee the United States, and it will be difficult for American individuals and businesses to obtain the latest products and technologies. In the case of Circle, we have already begun to move our internationally oriented products and services to Bermuda, where we have established a local regulatory licensed entity.
Bermudas Digital Asset Business Act (Digital Asset Business Act) is very forward-looking, and they provide a comprehensive regulatory framework for digital asset financial service companies. We believe that the approach taken by the Bermuda Government can and should be emulated by other countries.
Some of the positive aspects of Bermuda’s regulatory framework for cryptoassets are:
They have developed comprehensive national policies for digital asset businesses;
Instead of trying to incorporate digital assets into traditional banking, payment or securities and investment laws, they established a new set of laws for digital assets, including a new definition of digital assets that reflects digital assets—this The dynamics and multifaceted nature of new asset classes;
Their licensing and oversight framework is broad and covers many digital asset activities including: storage and custody, payments, exchange, trading, and exchange operations;
In the United States, the federal government and state regulators have more fragmented measures, and there is usually only one regulator to oversee crypto companies;
