The US presidential administration sees digital assets as a threat. What could Bitcoin do to hinder America?
According to a report released the day before by President Joe Biden’s administration, digital assets could pose a serious risk to the US sanctions programme. We should remind you that there are currently more than 9,000 sanctions in place by the US, and they have long served as the cornerstone of US foreign policy. Sanctions target states like North Korea and Iran for their role in human rights abuses, terrorism or other illegal activities. So what’s in the way of digital assets for America? We tell you more about the situation.
As a reminder, criticism of digital assets has been plentiful of late. In particular, the day before, experts at ratings agency Fitch issued a warning about stabelcoins - that is, coins linked to the value of the US dollar.
They believe that steibles could create new risks for traditional investment areas like commercial paper. That said, given the scale of the cryptocurrency niche, it seems unlikely. Although analysts continue to take advantage of their position and criticise coins further.
What are cryptocurrencies being criticised for?
Sanctions as international restrictions are primarily aimed at stifling the economy and its development. Digital assets, as they proliferate, are an alternative to traditional economic instruments, so they help avoid US influence. Here is a quote from a report on this, published in Decrypt.
Technological innovations such as digital currencies, alternative payment platforms and new ways to hide cross-border transactions potentially reduce the effectiveness of US sanctions. These technologies offer attackers the ability to store and transfer funds outside of the traditional financial system. They also empower our adversaries seeking to create new financial and payment systems designed to reduce the global role of the dollar.
So in essence, officials fear that people will use crypto-assets to transfer value to other nations. And since cryptocurrencies are decentralised and not dependent on any governments, there is really no way to prevent the transfer of coins. However, such a thing has been possible since January 3, 2009, when the Bitcoin network was launched. Why officials brought it up now is unknown.
US President Joe Biden
When it comes to digital assets specifically, the report makes two main recommendations. The first is that the administration wants sanctions to be clear, enforceable and adaptable.
The Treasury can build on existing outreach and engagement capabilities by improving engagement with industry, financial institutions, allies, civil society and the media, as well as with innovation – especially in the digital asset space.
In addition, the report calls for investment in modernising the Treasury sanctions regime.
In particular, investment should be made in deepening institutional knowledge and capabilities in the evolving space of digital assets and services to support the full life cycle of sanctions.
As we can see, the US government is slowly coming to recognise the threat to the dollar from Bitcoin and altcoins. So far, America’s dominance of the world’s national currency is unlikely to be shaken, but crypto is already beginning to be seen by many as a possible alternative.
And that gives it a chance for legalisation in many countries, just as Bitcoin was legalised in El Salvador in early September.
Douglas Rodriguez, head of the Central Bank of El Salvador
That said, Salvadoran politicians continue to actively support the integration of cryptocurrency into the country’s domestic processes. On the eve of the head of the Central Bank of El Salvador, Douglas Rodriguez said that the adoption of Bitcoin will not prevent the state to get the next tranche of financial assistance from the International Monetary Fund in the amount of 1.3 billion dollars.
As a reminder, earlier IMF representatives openly criticized the legalization of BTC in El Salvador. Rodriguez himself, however, noted that the decision was very beneficial, as it helped increase the rate of economic development by 9 percent above the most optimistic forecasts.
We believe that cryptocurrencies, due to their decentralised nature, do allow us to circumvent restrictions on the transfer of funds. However, it is still hard to believe that crypto will be used en masse by authorities in different countries, because crypto is still a relatively new phenomenon in the world. So far, it looks more like a desire to worsen the reputation of cryptocurrencies amid Bitcoin's readiness to set new price records.
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