It's really hard being a crypto executive in a post-FTX world. Not only are your luggage empty and your income is down, but U.S. financial regulators are subpoenaed one day and sued the next. So it's understandable why an industry leader like Brian Armstrong might want to project his national adoration before the media and authorities.
As chief executive of Coinbase, the largest U.S. cryptocurrency exchange, one wrong move could see his company sued and irreparably regulated by politicians already paranoid about a fraud-ridden industry. After all, why should the state not ban encryption entirely?
During a media blitz earlier this week, the executive tried to answer that question: support "cryptocurrency," while still pleading for the best interests of the U.S. government. However, it turned out that he was advocating the use of the most antithetical cryptocurrency to the "decentralized" ethos with which Bitcoin was born.
That’s right: Brian Armstrong supports a US government-issued stablecoin. In an op-ed published Wednesday with CNBC, Armstrong made his usual case for why the U.S. should be more welcoming to cryptocurrencies so as not to push the industry overseas. Doing so will bring countless negative effects, which can be roughly summarized into three points:
Compared with international competitors, the United States will fall behind in technological and financial innovation, losing many consumer benefits.
The crypto industry will develop in unstable and unregulated environments offshore or in jurisdictions with clearer rules. The dollar's position on the world stage will continue to weaken and risk being overtaken. That last problem is what Armstrong's stablecoin idea is trying to solve.
The idea of using stablecoins and other cryptocurrencies for international transfers is not new. MoneyGram partnered with the Stellar blockchain for exactly this purpose last year, and even some central banks have recognized their potential in the remittance market.
But advocating for government-issued stablecoins as opposed to privately-issued tokens like Tether’s USDT or Circle’s USDC is another matter. The token is virtually indistinguishable from a central bank digital currency (CBDC), and even pro-crypto lawmakers understand that it has the potential to be weaponized as a tool of state surveillance.
The Fed is already discussing what a potential CBDC might look like. In September, Chairman Jerome Powell claimed that the US CBDC would be “private,” but not “anonymous” meaning it would still be a permission-based system that would verify the identity of its users.
Whether people believe the Fed won’t invade Americans’ privacy in this way and that it won’t transform into a 100% state-controlled monetary ledger like China’s digital yuan is another matter. Ultimately, a CBDC requires users to trust a centralized intermediary that will not censor, freeze, limit, or devalue their funds.
