The US is in a hurry to lead international crypto-regulation before they get their own house in order

Yesterday, the US Treasury Department released a fact sheet describing their plans to work with foreign nations on cryptocurrency regulation and protect US precedence in the global financial system. It is the first major release to come out of President Biden’s Executive Order on Digital Assets, committing the government to study this burgeoning industry in order to exploit its potential while protecting Americans.

According to the document, the Treasury Department plans to “strengthen the United States’ leadership in the global financial system and in technological and economic competitiveness, including through the responsible development of payment innovations and digital assets.” Much of this will come through continued collaboration with international bodies such as the G7, G20 and the Financial Stability Board.

There is only one problem: the United States is still trying to get its own house in order.

For example, while the fact sheet outlines the United States’ comprehensive agenda to play a leading role in technology-driven financial innovation worldwide, touching on everything from stable coins and central bank digital currencies to preventing the illegal use of crypto, the United States cannot answer a long-standing question within its own limits, who regulates crypto?

In particular, the United States has not yet decided whether the US Securities and Exchange Commission or the Commodity Futures Trading Commission will take precedence over crypto- and crypto-related activities. There are turf battles between the agencies, and they both look to Congress for guidance.

In particular, the words “goods” and “security” are nowhere in the framework.

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SEC Chairman Gary Gensler – a staunch cryptocurrency critic and former CFTC chairman – has historically looked at cryptocurrencies as mainly securities that he believes are “filled with fraud, deception and abuse.” He recently doubled his crypto enforcement team in May and asked Congress for more funding.

“Many of these financial assets, cryptocurrencies, have the key attributes of a security. So some of them are under the Securities and Exchange Commission,” Gensler said in a CNBC interview last week. “

However, CFTC leader Rostin Behnam was ready to take on the main responsibility for crypto enforcement late last year.

“I think it is important for this committee to reconsider and consider expanding the authority of the CFTC,” Behnam said.

Congress has not yet succeeded in deciding the case, but the second best effort comes from Senators Cynthia Lummis and Kirsten Gillibrand, who introduced a two-party bill called the Lummis-Gillibrand Responsible Financial Innovation Act that proposes a comprehensive framework for regulating digital assets in USA

But that’s not all, because as much as the government, especially the Federal Reserve, talks about the importance of a digital dollar, a sovereign form of electronic fiat, it falls dramatically behind other nations making real progress. China is approaching the launch of the digital yuan, and countries like the Bahamas have been using a CBDC for over a year. There are more than 100 countries considering the use of a CBDC, and the United States is near the end of the line. Officials say it is important to get a digital dollar right, it is after all the world’s reserve currency, but the slow progress is hurting the US credibility on this issue.

Of course, there are reasons to move on, since the global crypto industry will not wait for the United States to get its house in order. One need look no further than the Russian invasion of Ukraine this winter, fearing that government officials and oligarchs will return to crypto as a way to avoid sanctions, as evidence. In addition, the North Korean government has used crypto hacking to fund the state, and has recently stolen nearly $ 600 million from Axie Infinity, a blockchain-based game.

But while the United States has previously relied on its soft power, it is also trying to lead by example. It should try more of the latter in this case, since this brand of American exceptionalism may not be as powerful as the original was decades ago.