The American Foundation for Defense of Democracies (FDD) has published their take on the risks associated with cryptocurrencies by countries that are being sanctioned by the US.
The essence of the report can be grasped by these lines in the executive summary of the report.
“While cryptocurrencies and blockchain technology may benefit millions of consumers by reducing the role of intermediaries and increasing transparency, U.S. adversaries see this development as an opportunity to reduce Washington’s ability to impose economic sanctions, which depend on intermediaries like traditional banks to monitor compliance.”
They acknowledged that blockchain solves numerous problems like making an efficient system by removing intermediaries. However, these intermediaries are the ones that help the US impose sanctions on states that are unfriendly to the US, namely, Russia, Iran, Venezuela, and China.
They go on to say that these countries are looking to diminish the strength of unilateral and multilateral sanctions by developing alternative payment systems for global commerce. They have restricted their citizens’ access to existing cryptocurrencies as they explore developing a state-backed digital currency.
The authors of the report warn about this new technology that has created a potential pathway to alternative financial value transfer systems outside of U.S. control. They go on to say:
“An independent cryptocurrency such as Bitcoin [BTC] gains wide adoption in commerce and becomes more relevant to the global financial system. Then, a U.S. adversary begins to build significant reserves in the cryptocurrency. The state thus uses its holdings to gain more influence in the global financial system.”
They end the report by saying that the US financial policymakers must now consider the risks to US competitiveness if banks in adversarial nations gain an edge over the U.S. in blockchain development. To finish with, they say:
“Washington must ensure that if blockchain technology ascends, it develops in a way that will expand the transparency, freedom, and prosperity of the last century. The way forward is not to just consider the threats emanating from various types of fintech, but to think more creatively how the global financial system should adapt to technological change.”