Yesterday, we submitted extensive comments in response to a request for input from the Treasury Department. The agency is looking for help figuring out how to support the development of digital asset technology without enabling bad actors. As a reminder, an Executive Order issued by the White House in March assigned the Department responsibility for quarterbacking elements of the government’s broader web3 strategy.
To date, much of the agency’s focus has been on managing potential risks related to money laundering and illicit use of digital assets. We think that’s the wrong starting point for a conversation about how policymakers should engage with web3. Our response, available in its entirety via this link, is built around three main points:
(1) The current financial system is failing to meet the needs of millions of Americans and billions worldwide. Consumers are currently spending $46 billion on anti-money laundering protections that only stop 0.2% of illicit financial flows. At the same time, the system is preventing millions from accessing basic financial services. Many legacy systems simply aren’t working the way they should.
(2) Web3 technologies can provide significant improvements over a broken status quo. Programmable assets can bring new functionality to finance. For example, emergency relief funds could be programmed for use on food or housing or designed to decrease in value over time, thereby reducing the potential for inflation. ZK proofs offer better solutions for preserving privacy. And digital assets in general provide a new infrastructure with the potential to be far more efficient, inclusive, and innovative than the antiquated systems currently used for moving money.
(3) Given the benefits of web3 architecture, the Treasury should prioritize responsible collaborative efforts with the private sector. The infrastructure of the internet and global finance is going to change. That much is clear. The question is whether the United States and other open societies can leverage web3 to provide serious alternatives to the sophisticated systems emerging from authoritarian regimes. That’s still an open question, and the answer will depend on regulators working together with technologists and industry.
We suggest that the Treasury Department take specific actions including building policy around consultative rulemaking rather than punitive enforcement, encouraging development of open standards for privacy-preserving digital identity, and embracing open-source innovation as an alternative to closed, centralized systems. Fostering the responsible growth of web3 is one of the most important steps the United States can take to ensure its strength and competitiveness in the 21st century. Our engagement with Treasury is one of many ways we’re working to help policymakers understand and embrace that potential.
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