This Unstable Moment Is a Chance for Crypto to Go Mainstream

Crises create opportunities for renewal. This is a moment for cryptocurrencies to reinvent money and the financial system.

AccessTimeIconMar 25, 2020 at 8:39 p.m. UTC
Updated Sep 14, 2021 at 8:22 a.m. UTC
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Mark Blackman consults on emerging technologies after a career at Qualcomm. James Cooper, a CoinDesk columnist, is a professor of law at California Western School of Law in San Diego.  

With the impacts of COVID-19 still ravaging financial markets and trillions being deployed by governments and central banks to stem the economic carnage, one cannot help but wonder if this is cryptocurrency’s breakout moment. This unstable environment seems ripe for cryptocurrency to come out of the shadows and become a viable asset class and legitimate alternative to our fiat-based economies. With the proposals for a digital dollar, some legislators in the U.S. Congress seem to think so.

Within a matter of weeks, we have gone from living our lives unencumbered from worry to being confined to our homes and practicing social distancing. With this backdrop, it is easy to believe anything is possible. But is the United States and the rest of the world ready to broadly accept and utilize digital currencies and related blockchain innovations?  

Technology is disruptive, given all the economic and political impacts that come with the adoption of innovations. It is no surprise that the legal structures to regulate the manner in which society utilizes new technologies always lag behind the technologies itself. The regulatory issues surrounding cryogenic freezing of embryos, the advent of online gambling, or the distribution of digitized music are good examples. 

Our Founding Fathers did not think about any of these when they set out to create the structures for the democratic governance of this country. Cryptocurrencies and blockchain technologies are no different on the regulatory front. The agencies tasked with protecting consumers concerning securities, overseeing currency, and ensuring the fairness in commodities trading have been slow-footed to catch up to the workings of this complex technology. 

We need to clearly determine to what extent smart contracts can be enforced in a court of law.

The dearth of core legal prescriptions is preventing massive adoption. Financial services, property titles, and tax accounting all require new regulations to accommodate the changing realities brought on by blockchain technologies. We need to clearly determine to what extent smart contracts can be enforced in a court of law. There is also a need to increase privacy protections before there is broad adoption of blockchain technologies. Without the fundamentals in place, it will be difficult to trust this new technology with our sacred social relations – identification, our money, our reputation and so forth. This will not be any easier given the immediate need to rebuild our financial systems but for many of us, our jobs themselves.  

Beyond the legal challenges, there is the ever-present hurdle of user adoption which continues to prevent the wide scale acceptance of cryptocurrencies.  Despite all of the issues with fiat-centric currency, there is great comfort in the traditional security that our current financial services regime provides.  If a thief steals your credit card, your funds are replenished; if a bank goes bankrupt, up to $250,000 is covered by the Federal Deposit Insurance Corporation; and if the bailouts and economic stimulus packages achieve their intended outcomes, then our loyalty to the current centralized banking system will only grow. 

For the new world of cryptocurrencies to go mainstream, the average consumer must work through the complexity of current key management implementations.  In particular, if cryptocurrencies become a truly distributed asset class, consumers should also be ready to assume their own losses through theft or user error. To maintain legitimacy, we must build the capacity of individuals and businesses to navigate the thousands of incompatible coins and projects to determine what best services their needs.  There is a huge need for public education to this end. Moreover, there are few decentralized applications that have sparked the public’s interest or demonstrate a true utility.  

Even as Congress considers the use of a digital dollar in its varying versions of the newest stimulus package and the U.S. Federal Reserve Bank continues its study of a digital dollar’s role in the economy, technical and user adoption blockers will remain. There is no doubt a digital dollar can serve as a necessary transitional step, but it will be a new, unproven technology, with the highest of requirements to ensure the scalability, reliability, and ease of use. These problems reflect the legacy of trust that the U.S. (paper) dollar provides. It is likely that government-designed solutions will fail short of their intended mark when compared to proven open source deployed by an ecosystem of competing tech firms.

The federal response to the economic chaos of COVID-19, with both Senate and House bills having considered the introduction of a digital dollar, may well expedite mainstream acceptance of cryptocurrencies. While not known for their nimble innovation nor expedited implementation of laws, the actions this week by the federal authorities auger well for the future of cryptocurrencies.  They will not, however, result in a sea change in the world’s financial systems. That will take some time – just like a vaccine for the coronavirus.


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