The global financial and technological order is changing rapidly, and the U.S. must be at the center of these changes. As China aggressively pushes its digital Yuan as a complement to its insidious Belt and Road Initiative (BRI), the U.S. risks ceding strategic ground by stifling cryptocurrency innovation at home. Supporting a robust domestic crypto ecosystem is not just an economic necessity but a national security imperative. By fostering cryptocurrency development, the U.S. can counter China’s digital currency ambitions, maintain the dollar’s global dominance, and secure its technological and geopolitical leadership for decades to come.
China’s digital yuan is more than a technological experiment; it’s a strategic tool to reshape global finance. By integrating it into the BRI, Beijing aims to create a payment infrastructure that bypasses Western financial systems, reducing reliance on the U.S. dollar and the SWIFT network that currently shapes global finance.
As former House Speaker Paul Ryan noted last year, China’s vision is to entrench the digital yuan in cross-border trade, particularly in developing nations, where BRI investments already wield significant influence. This is a direct challenge to the dollar’s status as the world’s reserve currency, which underpins U.S. economic power and enables sanctions and other economic tools as a foreign policy instrument. If the digital yuan gains traction, it could erode the U.S.’s ability to enforce sanctions, monitor illicit financial flows, and maintain its economic leverage.
The U.S. cannot afford to counter this threat by restricting cryptocurrency innovation domestically. Overly stringent regulations or outright bans on crypto would kneecap American ingenuity, drive talent and capital overseas, and cede the future of finance to adversaries. The same principle applies with emerging technology more broadly. Just as limiting AI development would hand the PRC an advantage in next-generation warfare and economic innovation, stifling crypto would surrender the financial battlefield.
A thriving U.S. crypto sector, particularly dollar-backed stablecoins, offers a powerful counterweight to the digital yuan. Stablecoins – privately issued cryptocurrencies that are pegged to the dollar – combine the efficiency and accessibility of digital payments with the trust and stability of U.S. currency. As Speaker Ryan argued, stablecoins can serve as a “Trojan horse” for dollar dominance, extending its reach into global markets without the need for centralized control. Unlike the digital yuan, which is a tool of state surveillance and control, stablecoins operate on decentralized blockchains, aligning with the values of transparency and freedom that resonate globally. Congress is already considering such legislation, which would establish a workable regulatory framework and support stablecoin issuance. By supporting stablecoin adoption, the U.S. can ensure that dollar-based digital transactions remain the preferred choice for international trade and remittances, particularly in BRI-participating countries.
The national and economic security benefits of this approach are manifold. First, a dollar-dominated crypto ecosystem preserves the U.S.’s ability to monitor and regulate global financial flows. Blockchain’s transparent ledger allows for tracking transactions, combating money laundering, and enforcing sanctions, capabilities that would be diminished if the digital yuan becomes the default for cross-border payments. Second, supporting crypto innovation keeps the U.S. at the forefront of financial technology, attracting global talent and investment. Prioritizing cryptocurrency will supercharge the U.S. high-tech job market and drive economic expansion.
By fostering a vibrant crypto ecosystem, the U.S. can attract the world’s smartest frontier technology minds, creating high-paying jobs in blockchain development, cybersecurity, and financial innovation. This mirrors the tech sector’s role in maintaining U.S. leadership in AI and cybersecurity. Third, a robust crypto industry creates economic resilience by diversifying financial infrastructure, reducing reliance on vulnerable legacy systems like SWIFT, which our adversaries can circumvent. The resulting economic growth will cement the U.S. as the epicenter of technological and financial innovation, ensuring prosperity stays home.
Conversely, restrictive policies would have dire consequences. Critics of cryptocurrency often cite risks like fraud, volatility, and illicit use. These are real concerns, but they are not unique to crypto and can be addressed through targeted regulation, not prohibition. Similar to the internet’s growth in the 1990s, the U.S. can lead by balancing innovation with oversight. If the U.S. limits crypto development, American firms and talent will migrate to jurisdictions with friendlier frameworks. Worse, it would leave the field open for China to set global standards for digital currencies, embedding its authoritarian values into the financial system. Developing nations, already indebted to China through BRI loans, may have little choice but to adopt the digital yuan, creating a financial sphere of influence that excludes the U.S.
The path forward for American crypto leadership is clear. The U.S. must embrace cryptocurrency as a strategic asset. Congress should pass legislation to clarify regulatory frameworks, encouraging stablecoin innovation while ensuring compliance with anti-money laundering and sanctions laws. The Treasury Department should explore public-private partnerships to promote dollar-backed stablecoins globally, particularly in BRI countries. The Federal Reserve, while cautious about a central bank digital currency, should study how stablecoins can complement existing monetary systems. These steps will reinforce the dollar’s dominance, counter China’s digital yuan, and secure U.S. leadership in the digital age.
The U.S. must lead, not retreat, in shaping the rules and infrastructure of digital currencies. By supporting crypto, the U.S. can ensure that the future of finance is shaped by American innovation and values, not the ambitions of the Chinese Communist Party.
About the Author:
Alexander B. Gray served as deputy assistant to the president and chief of staff of the White House National Security Council, 2019 to 2021. He serves on the Policy Board of Paradigm, a cryptocurrency investment firm. The views expressed are his own.
