Is the cryptocurrency industry a matter of national security?
Brian Armstrong, cofounder and CEO of crypto exchange Coinbase, seems to think so, and argues it needs to be considered in the same class as goods and infrastructure vital to the U.S. economy.
The reason for his impassioned plea might have to do with the SEC’s recent crypto crackdown, including an investigation into whether Coinbase itself improperly allowed Americans to trade digital assets that should have been registered as securities.
“One of the strongest policy arguments for cryptocurrency is that it’s a national security issue,” he posted to Twitter, in a potential attempt to once again draw attention to the legal gray area in which crypto falls.
Armstrong said the industry must not be allowed to go the way of microchips, whose bleeding-edge processors found in Apple devices are made exclusively in Asia, or for that matter fifth-generation mobile network equipment that is dominated by China’s Huawei, Ericsson of Sweden, or Finnish group Nokia.
“The U.S. missed [out] on semiconductors and 5G, which is now largely manufactured offshore. It can’t afford to have cryptocurrency go offshore as well,” he wrote, adding this was valid for every country.
For years, Coinbase and others in the industry have begged the agency to offer clear rules on how the law of securities applies to the crypto realm. And for years, the SEC has refused to do so, instead pursuing an uneven approach known as “regulation by enforcement” that forces companies to guess what the agency will do.
“Regulation by enforcement has a terrible chilling effect, and rhetoric matters,” Armstrong wrote. “We’ve already seen a huge amount of crypto talent, asset issuers, and startups go offshore.”
The Coinbase CEO may have a point, as many countries would envy the chance to attract business away from Wall Street. The U.S. dollar’s strength is not just a function of its role as the global reserve currency but its deep financial markets that soak up excess capital from abroad.
London’s City, the only financial district that rivals Manhattan, has also been trying to guard against a broad-scale exodus of money or talent with the new government under U.K. Prime Minister Liz Truss proposing to scrap a limit on banker bonuses.
High-paid financial services jobs are not the only appealing sector to prove vital for economic productivity but also help grow a government’s tax base. As the Coinbase CEO pointed out, governments are waking up to the need for onshore semiconductor production as well.
Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.