Czarist America Looks to Conquer Crypto
We Americans have lived under the thumb of the czars for over 80 years. It is time to throw off the shackles of their cronyism and incompetence. While they sit in their palatial office buildings in the capitol, giving orders from on high, many of the problems they claim to solve only get worse.
Before you think I’ve gone more than a little crazy, recall all the times you’ve heard some executive-branch employee referred to as a czar. To be fair, that’s never been an official title, but it’s been in common usage since it was originated by executive-power enthusiast Franklin D. Roosevelt. Even if the term is informal, it confirms our reflexive tendency toward top-down control. We have a problem? There’s a czar for that.
Get ready, crypto community, because the czars are coming for you. Earlier in June, the Securities and Exchange Commission appointed Valerie Szczepanik to a new position: “associate director of the Division of Corporation Finance and senior adviser for digital assets and innovation,” known informally as the “crypto czar.”
This appointment should be an occasion for the crypto community to take a hard and pragmatic look at what regulations lie down the road and how they might achieve the best possible results. But first, let’s take a brief look at the history of czarism in America.
Roosevelt Started It
The term “czar” was applied to no fewer than 11 officials in FDR’s White House, including the economic czar and—I’m not kidding—the czar of information and the czar of censorship. Small wonder Benito Mussolini was quite fond of FDR.
The term has been used for officials in every administration (with the exception of John F. Kennedy’s) since, though with widely varying frequency.
President Ronald Reagan, hero of limited government and never a connoisseur of anything Russian, had only one czar. Given the “just say no” climate of the ’80s, it was a drug czar: Carlton Turner. On the other end of the spectrum, presidents George W. Bush and Barack Obama would have made even the Romanovs proud, respectively appointing 33 and 38 officials that came to be known as czars.
The increasing use of czars runs parallel to increases in other outlets of presidential power, such as executive orders. It seems our political discourse is stuck with an assumption that problems require a single expert in Washington guiding a policy from the top down. It’s an assumption that’s increasingly outdated and dangerous.
Valerie the Great, or Valerie the Terrible?
What does this mean for cryptocurrencies? First, it means the government is starting to take them more seriously, a testament to their meteoric rise. Second, it’s time to check our political philosophies at the door and get realistic about what types of regulation can and will happen.
Too often, people in the crypto community focus on either a “cryptopia” with no regulation, or an Armageddon where cryptocurrencies are outright banned. I don’t think either will happen, but there are challenging times ahead.
Economists often talk about rent-seeking, in which large corporations use their money, power, and connections to extract preferential treatment and regulation. In the crypto czar, such corporations now have a point of contact for rent seeking.
But who in the crypto community has the money, power, and connections to engage in rent seeking? This is where the radical decentralization of many cryptocurrencies poses a challenge. Large banks and other incumbent firms with uses for blockchains and tokens will no doubt have their voices heard. But a constructive conversation needs to begin in the more decentralized crypto community.
At a conference panel last winter, I said that entrepreneurs should be looking for ways that crypto can exist alongside current fiat money. Let’s just say I didn’t get a standing ovation. But if the small developers, entrepreneurs, and enthusiasts that form the crypto community want their voices heard, they’ll need to seek an audience with the czar.
Max Gulker is a senior research fellow at the American Institute for Economic Research. Gulker holds a doctorate in economics from Stanford University and a bachelor’s in economics from the University of Michigan.