Is the U.S. falling behind in blockchain and crypto innovation when they can easily be leading it? And, what countries have the biggest head start right now and are worth watching?
The Regulatory Backdrop
One of the biggest risks to the wider adoption of the digital currency ecosystem is the regulatory backdrop.
"Historically, America has taken a 'first do no harm' type of approach to new technologies, which has meant that we have taken the leadership role simply by letting the market do its trick. That was true for the transistor, to the early days of the Internet, to the genomic revolution, which is changing how consumers utilize healthcare...and now we have this new network technology, which returns the Internet to its decentralized roots. In our opinion, it has positive implications for the GDP, consumer welfare, and the prices people pay for goods and services," said Matthew Sigel, head of digital assets research for VanEck.
Blockchain technology may take power away from big banks and big tech and return it to the people. Instead of leading on that, the U.S. is letting our neighbors Brazil and Mexico lead the way on ETF adoption by approving those instruments. Other countries seem to be moving faster ahead while the U.S. sits on its hands.
"From our perspective, that's unfortunate," Sigel added. "It's a strange twist of fate that reflects just how politicized this issue has become. In the long run, we think that the truth will win out...the blockchain just has too many advantages when it comes to efficiency, cost, and unlocking demands that we didn't know we had for transferring value across the Internet globally, 365 days, 24/7."
It's not too late for the U.S. as there is a lot of innovation that is happening in Silicon Valley, CA funded by American venture capitalists, but we do need some regulatory clarity in order to bring the technology to the next level.
The U.S. has been ahead of the pack on most innovation because it has a setup that lets new products and services develop without intrusive government meddling, but this new technology is potentially a bit scary for the government because, by definition, it takes some of the power away from those existing institutions that we've come to trust over the decades.
"In the long run, the innovation that this technology unlocks by letting every individual participate without the permission of large institutions should increase financial inclusion and unlock demand for new financial transactions that previously didn't exist. It's not too late for the U.S. to take a leadership role...we have plenty of companies that are doing great work -- Coinbase (COIN) would be a great example because it's the largest crypto exchange in the world, but it's only a 12% market share. Crypto is a very fragmented market and it's too early to say who the eventual winners and losers will be, but we're just hopeful that the regulators and public can become more educated on how this technology will empower them to make more money," said Sigel.
The U.S. is definitely lagging behind when it comes to crypto regulations and hopefully, this will change over the next year with the new administration, but the U.S. has been leading the pack in terms of regulation related to blockchain in capital markets.
"In the whole domain of digital securities, which are basically securities that are based on blockchain technology, the U.S. and the SEC have been leading the pack way ahead of any other country. The result of that was significant growth in the U.S. in ventures and capabilities using blockchain in capital markets vs. other countries. So, it proves what Matthew was saying...regulations enable the growth of the market and the growth of the technologies supporting it," said Tal Elyashiv, founder and managing partner of SPiCE VC.
Watch the full webinar sponsored by VanEck to hear more insight about the evolution of blockchain and how the foundation of crypto Is changing fintech: