In the West, people often think of technologies like 5G wireless and quantum computing in terms of national competitiveness. Crypto? Less so. One American diplomat believes that needs to change. Brandon Possin, a Foreign Service Officer at the U.S. embassy in Tokyo, reached out to POLITICO in February after DFD wrote about the Japanese government’s efforts to make the country a Web3 leader. Read Possin’s essay in POLITICO Magazine here. Possin believes that countries like Japan are wise to embrace it and that the U.S. government — too focused on the risks and scams that plague existing crypto applications — is missing the bigger blockchain picture. He has received unusual permission from the State Department to publicly air his critique of government policy, and this afternoon POLITICO Magazine published an opinion piece by Possin laying out his views (which do not necessarily represent the State Department’s). In the spirit of constructive dissent, let's take a look at Possin's arguments. In short: “the U.S.,” he writes, “is at risk of blowing its approach to the next generation of the internet. When it comes to formulating digital asset policy, we need to embrace the internet’s inevitable evolution. We need more technologists, fewer lawyers, and less bias in favor of financial sector incumbents.” From his perch in Tokyo, Possin has kept an especially close eye on China’s approach to blockchain. While the country’s bans on cryptocurrencies and Bitcoin mining have garnered the most headlines, Possin focuses on Beijing’s efforts to harness state-controlled blockchains to win greater influence over the future development of the internet. Possin points to China’s Blockchain-based Services Network, a state-backed suite of tools for developers that provides Web3 infrastructure. The network, rolled out in 2019, is meant to act as a platform on which private-sector developers can build apps with features like self-executing smart contracts. In September, one of the world’s largest banks, HSBC, announced it would participate in the network to explore its utility for streamlining payments. Yaya Fanusie, a former CIA analyst who works as a policy director for a blockchain trade group, the Crypto Council for Innovation, has followed the network’s development in recent years. He tells DFD that China has lured Web3 developers to build on the network by offering dramatically reduced fees for services like cloud computing storage. The catch, Fanusie says, is that: “You’re building on something that China controls.” In his op-ed, Possin argues that because of China’s growing importance in world trade, it will nonetheless be able to push trading partners to adopt its Blockchain-based Services Network, and other online systems, like its digital yuan. He warns that, in effect, China is positioning itself to capture the management of large swathes of economic activity on internet infrastructure it controls. “Just as capitalist and communist trade blocs squared off in the 20th century, companies wishing to export their goods to select markets will soon have to navigate competing trade blockchains,” he said. “They’ll have to choose between permissionless — or interoperable — systems built on open blockchains versus firewalled, permissioned closed systems like those preferred by China.” Possin views open blockchain networks as something like a 21st century equivalent to the Cold War’s non-aligned movement. And he advises U.S. policymakers that if they wish to check China’s ambitions to grow its influence over the next generation of the internet, they are better off aligning with the users and operators of these open blockchain networks. “The American establishment,” he warns, “cannot afford to alienate the rapidly strengthening global internet, with its army of software and cybersecurity experts and trillion-plus dollars worth of digital assets.” Possin’s ambition to re-orient U.S. policy towards Web3 faces a number of obstacles. The dismissal that Possin detects from within the government is also visible from without. Just look to the economic report issued last month by the White House, which pooh-poohs the value of existing blockchain applications. It’s not only in Asia that rival economic powers are looking to capitalize on U.S. skepticism: Elements within the European Union are also vying to attract American crypto firms by pitching a friendlier legal environment for the technology. And there are understandable reasons why the U.S. government would not be in a rush to embrace technologies billed as disruptors of the global internet and financial systems: the U.S. already dominates the existing ones. You might call this “the Innovator’s Dilemma, but for countries.” Even if Possin does succeed in changing views, acting on them would be another matter. Executing a cohesive national strategy towards a rapidly developing, multi-faceted group of technologies that don’t fit neatly into existing policy frameworks may just be a bridge too far for today’s federal government.
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