The following analysis is based on the OODA Loop 2021 Year-End Cybersecurity Review, the OODA Almanac 2022 – Exponential Disruption, and OODA CEO Matt Devost’s recent article, Is Bitcoin a National Security Risk?.
To achieve stability and legitimacy, crypto and digital currency markets depend on:
- Enhanced security measures – which are now a clear precursor to regulation for the legitimacy of this market. The Scale and Severity of Cryptocurrency Heists [over the course of 2021] made very clear the need for enhanced security. Many crypto and digital currency initiatives will encounter consequential cybersecurity issues in 2022 that will impact public adoption and invite increased regulatory pressure. A middleware ecosystem is emerging in the form of marketplaces and exchanges based on Web2 technologies that are deployed without considering cybersecurity best practices.
- Regulation or over-regulation? : According to conventional wisdom, “traditional” regulation would be the inevitable fate of cryptocurrency. The US government does not have much experience in understanding its role (if any?) in disruptive innovation and technology. The Catch-22 here is that any effort to thwart innovation in this space could create lasting national security risks in the future if the United States loses the innovation advantage driving key projects toward external domiciles or ceding control of critical infrastructure to foreign governments.
- Global Crypto and Digital Currency Adoption Rates: The economic benefits of the US dollar serving as a global reserve currency could be diminished with the widespread adoption of Bitcoin as a reserve and exchange of value. Several nation states have or are seeking to recognize Bitcoin as currency or legal tender and several US state initiatives are also underway. The secondary challenge here for the US government is to ensure that any inevitable movement towards a new model of reserve currency is directly linked to the US innovation ecosystem.
Below is a brief overview of crypto and digital currency initiatives around the world, all of which are officially sanctioned to improve national competitive advantage (in case crypto overtakes the US dollar as the world’s reserve currency) . It is the cumulative adoption rate of the legalization and regulation of cryptocurrencies and state-sanctioned digital currencies that will propel this innovative system of value exchange to the top as the official global monetary standard.
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