Board member Peter Harrell warns that ceding digital finance leadership weakens enforcement and empowers adversaries
What is the biggest risk if the United States falls behind in digital finance policy and innovation?
I approach this question from a national security perspective, having spent roughly 15 years working across the U.S. national security ecosystem at the State Department, in the White House, at think tanks, and in private practice. I first encountered digital assets in the early 2010s, when there was concern that terrorist groups or hostile actors might exploit what was then a very nascent ecosystem.
What became clear very early on is that the only way to mitigate those risks was for the government to engage directly with the innovators and companies building these systems to collaborate on standards and rules so bad actors couldn’t exploit them.
But in the past decade, we’ve seen a bifurcation emerge. Where digital asset infrastructure is tied to the United States or U.S.-aligned institutions, we can regulate it, trace illicit activity, and enforce the law. Where the U.S. steps back, other bad actors like Russia and Iran fill the void, and we lose visibility and leverage entirely.If the U.S. is not central to building the next generation of global financial infrastructure, we will increasingly find ourselves unable to prevent bad actors from using it. There will always be a degree of illicit activity, just as there is in traditional banking, but a well-regulated, U.S.-centered ecosystem allows us to protect core national security interests –sitting on the sidelines does not. Recently, I analyzed oil flows from sanctioned countries like Iran and Venezuela. Venezuela has publicly stated that it is attempting to receive payment for oil in digital currencies. If the U.S. is leading in digital finance, we have financial tools to counter that. I would much prefer to live in a world where we can enforce sanctions through financial systems, rather than one where enforcement requires military or coercive action.
Where does blockchain improve transparency and enforcement, and where does it make things harder?
One of the most underappreciated aspects of blockchain technology is how effective on-chain analysis can be. Law enforcement has become increasingly adept at tracing illicit flows of stolen funds, laundering activity, and ransomware payments. In many ways, blockchains are more transparent than traditional financial systems.
The challenge usually isn’t identifying where funds are: it’s what happens when those funds are sitting in a wallet overseas, outside U.S. jurisdiction. I’ve spoken with victims of early hacks who could see exactly where their assets were, but had no way to recover them.
That’s why jurisdiction matters. The more digital asset activity flows through U.S.-connected exchanges and infrastructure, the more ability we have to freeze assets and enforce the law. The worst outcome is perfect visibility with zero enforcement power and that’s what happens when the U.S. disengages.
How could digital currencies reshape global trade and cross-border payments?
Cross-border payments remain slow and expensive, despite years of effort by banks and central institutions to fix them. Digital assets, particularly stablecoins, are likely to become an increasingly common part of global trade payments because they are faster, cheaper, and more reliable.
Most businesses don’t want exposure to volatility, so stablecoins make sense for invoicing and settlement. I don’t think this will radically change what goods are traded, but it will absolutely change how trade is financed.
Blockchain-based systems also help bridge trust gaps between parties who don’t know each other, through smart contracts and transparent verification. That has real implications for international commerce.
Does U.S. disengagement from digital finance threaten dollar dominance?
The dollar’s dominance is likely to decline gradually over time; it’s probably inevitable. We can debate the pace, but we already see countries diversifying reserves away from dollars and into gold. That shift has been a major driver of record gold prices.
Gold, however, is a poor substitute for a modern reserve or payments currency. The real question isn’t whether the dollar’s dominance changes, it’s what replaces it. Digital assets, including stablecoins, will be a major part of that answer.
If the U.S. leads, the next generation of global finance will reflect U.S. values and interests. If we don’t, it will be shaped by others, outside our influence.
What role can Open Frontier play in shaping this future?
Open Frontier has a critical role in educating policymakers, telling compelling stories, and helping sensible legislation cross the finish line. I also think there’s tremendous value in engaging early with candidates, especially those who haven’t yet locked in rigid positions.
Once someone stakes out a position in Congress, it can be very hard to change their mind. Reaching future lawmakers before that happens is one of the most effective ways to build durable support for smart digital finance policy over time.
How can organizations like Open Frontier most effectively engage policymakers?
Policymakers want rigorous policy analysis, but they also want human stories. They want to understand how these issues affect real Americans at home, not just adversaries overseas.
We’ve seen scams like romance fraud and “pig-butchering” schemes devastate individuals, with funds often flowing overseas through a mix of digital assets and traditional banking. A well-regulated, U.S.-centric digital finance ecosystem gives us a better chance to recover those funds and protect victims.
At the same time, we can’t lose sight of the positive use cases. During the pandemic, I spoke with a small business owner trying to pay a contractor in Eastern Europe. Traditional wire transfers were slow, expensive, and unreliable. Digital payments solved a real problem. These kinds of stories resonate, especially when policymakers realize that many U.S.-centric assumptions simply don’t hold globally.
How should policymakers think about regulating digital assets while preserving innovation?
It’s easy to get lost in the technical details of long, complex bills. At a high level, regulation needs to be practical, predictable, and grounded in real risks. I’ve supported approaches like recent stablecoin proposals that aim to provide clarity without suffocating innovation.
Debates like SEC versus CFTC oversight became overly personalized in recent years. With different leadership, those questions should be far less contentious. What matters most is not which agency wins a turf battle, but whether the U.S. creates a regulatory framework that allows innovation to happen safely here rather than offshore.