Should the United States government get into crypto? It's complicated.

• Author: Alsever, Jennifer

THIS SPRING, as cryptocurrency markets crashed and stablecoins (like Terra LUNA) imploded, a new conversation percolated across the globe and within the US government: the prospect of a US digital dollar.

At least 86 percent of central banks across the globe are actively researching digital currencies, according to a survey by the Bank for International Settlements, a Swiss institution known as "a central bank for central banks." Nearly one-third are testing currency, and the European Central Bank is aiming for a digital euro by 2025.

But China is winning the digital currency war, jumping far ahead of the United States--in years, in technology implementation, in billions of dollars, in hundreds of millions of actual users in the market, and in manpower. The country has not launched its digital yuan, but it's already in the pilot stage. The country is working with Brazil, Russia, India, China, and South Africa with plans to issue a "new global reserve currency." Saudi Arabia, Egypt, and Turkey may join them.

The US Federal Reserve, meanwhile, is only exploring the concept. President Joe Biden did sign an executive order for a national policy for digital assets. The House Financial Services Committee held a hearing on digital currencies, and the Federal Reserve conducted a study on how to develop a US digital dollar.

Suppose China's digital currency becomes the global standard. In that case, the country could potentially control that infrastructure and have visibility into money flowing well beyond its borders. It would be an unprecedented tool for monitoring people's behavior and activities regardless of location. China's momentum could force dramatic change in the international monetary system and drive significant geo-political and trade effects. The SWIFT (Society for Worldwide Interbank Financial Telecommunications) system, which governs transactions across borders between banks, could be obsolete. Some say digital currency could be the biggest change in money since the end of the gold standard.

"It would be very destabilizing," says Dan Young, founder of Ugly Unicorn, a Salt Lake City crypto hedge fund. "It would obviously increase military escalation and higher tensions across the globe."

It's far easier for an authoritarian, centralized nation to make decisions and execute them swiftly. Democratic nations require more collaboration, and in the US, that has not been happening. Partisan gridlock makes it tough to get any legislation...