The George Mason University Antonin Scalia Law School National Security Institute hosted a webinar on Wednesday, March 30, titled “Crypto and National Security: How to Validate American Innovation and Verify U.S. National Security.” Journalist Laura Shin moderated the discussion. CEO of the Crypto Council for Innovation Sheila Warren, executive director of Coin Center Jerry Brito, and global managing partner and chief strategy officer of risk compliance and monitoring firm K2 Integrity Juan Zarate were participants.

After opening comments, the first of three questions posed to the panel concerned American innovation. Brito expressed hope that crypto would be allowed to develop with open access like the Internet did. He spoke of the process as letting “a thousand flowers bloom.” Zarate spoke of using blockchain technologies “to challenge U.S. adversaries.” It will be possible, Zarate said, to reinforce U.S. capital markets and the role of the dollar “if we have a say and a hand in how” the technology is developed. He mentioned, in particular, the use of dollar-denominated stablecoin to the nation’s advantage.

The second question concerned regulation. Zarate bemoaned the “shoehorning” approach to crypto regulation, which is based on agencies’ purviews rather than the nature of crypto, while Brito spoke in favor of principle-based regulations. Brito criticized the IRS for being a regulatory “laggard.” Warren spoke about incentivization and risk, and Zarate rejoined the discussion to say that absolutism — the unwillingness to accept any risk of bad action — is “not how the financial world deals with risk.”

The discussion of the digital yuan proved to be the liveliest, with Brito and Warren sharing their very different perspectives. Brito argued that 

“a digital yuan is still a yuan, and nobody wants to hold yuan.” 

The Belt and Road Initiative, he said, would not change the attitude toward the Chinese currency. But a “bearer-private” digital dollar could “dollarize the Internet overnight” and “cement dollar dominance in the world,” Brito said. Warren saw a greater threat from the Chinese debt trap for developing countries, which could result in the forced adoption of the digital yuan.

The webinar had an audience of about 100, according to host Jamil Jaffer. It is available for viewing on YouTube.