“If crypto is going to define the future, I want it to be mined, minted and made in the USA,” declared President Donald Trump at last July’s Bitcoin Conference 2024 in Nashville. This friendly stance marks a complete about-face from Trump’s position during his first term; in a tweet from July 2019, he expressed his aversion to cryptocurrencies, claiming their values were “highly volatile” and “based on thin air.” While likely inspired by a search for political gain, or the tens of millions he made off his own $Trump meme-coin, Trump’s reversal reflects rising support in the Global North for policies friendly toward nontraditional currencies.
These innovative currencies come in two primary forms: crypto and digital currencies. Countries such as the United States, UK, and those comprising the EU have robust cryptocurrency markets with combined trading volumes in the trillions, and most are simultaneously in the process of evaluating digital currency adoption. It is important to highlight the differences between these two forms: Digital currencies are simply existing cash currencies exchanged in electronic form and backed by central banks, while cryptocurrencies are a tradable commodity not supported by or reliant on a central authority. This means that monetary policy influences digital currencies in similar ways to traditional cash; central banks maintain control over digital money supply and interest rates. Conversely, cryptocurrencies are traded on turbulent markets and thus, if accepted as legal tender, have the potential to be far more disruptive toward central bank autonomy. As tradable commodities, their values are far more volatile than existing forms of money. The central banks of countries who adopt cryptocurrencies would struggle to stabilize their values and face pressures from firms, investors, and other international actors. This is especially true for less developed nations with smaller central banks and weaker regulatory frameworks.
International regulation seems like the natural means of addressing this issue. However, the nations poised to lead discussions about developing new cryptocurrency regulatory institutions are almost exclusively highly developed countries in the Global North who already dominate existing international financial institutions. Inequalities in international institutions begin at a structural level. Consider the International Monetary Fund (IMF), where member states receive a share of voting power proportional to their annual financial contributions. The United States contributes the most out of any member nation, and consequently holds about 18 percent of the IMF’s total voting power. Many decisions the IMF makes require an 85 percent supermajority; as such, the United States has unitary veto power over one of the most influential international financial institutions. Poorer, less developed nations struggle to make their voices heard.
International regulation is the norm in our existing economic world order. But if the Global North creates a new cryptocurrency regulator that continues to reinforce existing paternalistic inequalities, central bank autonomy in developing nations would be harmed. Countries with smaller central banks already possess less liquidity and a more restricted money supply, making it inherently difficult for them to deal with unpredictable markets and economic crises. Cryptocurrency adoption combined with lopsided regulation could worsen the existing struggles of the developing world.
To help combat or even prevent this situation, the international community is left with two options. The first would be creating a new international financial institution tasked with developing and managing a comprehensive, equitable set of cryptocurrency regulations. This body must be structurally different from existing regulators. Unlike the IMF, it should uplift the underrepresented Global South by offering a more equitable distribution of voting power, not one based on existing wealth or hegemonic power. It must foster a cooperative environment so that nations work together to ensure that issuers of cryptocurrency assets operate under universal governance frameworks with appropriate levels of accountability and transparency. With an agency like this one including developing countries’ perspectives to stabilize cryptocurrency values, the Global South would face fewer barriers to cryptocurrency acceptance and would also have a seat at the table to address future financial innovations, helping to reduce paternalistic inequalities as a whole.
Unfortunately, history has shown that the creation of an institution like the one described above is a challenging task. It seems unlikely that the framework of a new international cryptocurrency regulator would deviate from existing bodies dominated by the viewpoints and policies of the Global North. This leaves a second, more controversial approach: the lack of a cryptocurrency regulatory institution entirely. With no international body to perpetuate systemic inequalities, countries in both the Global North and South would be free to create their own regulations and agencies tailored to their specific needs.
” This leaves a second, more controversial approach: the lack of a cryptocurrency regulatory institution entirely. With no international body to perpetuate systemic inequalities, countries in both the Global North and South would be free to create their own regulations and agencies tailored to their specific needs. “
Say cryptocurrency continues to rise in popularity worldwide, and developed countries with wealthier central banks increasingly accept different cryptocurrencies as legal tender. The government of a smaller, developing country in the Global South might decide to do the same, hoping to keep up with current trends in finance. This decision could promote international trade and increase domestic investment, but it would also weaken the strength of said country’s central bank. Alternatively, the country could choose to protect its central bank autonomy and ban the domestic acceptance of cryptocurrencies as legal tender. This, in turn, may exclude the developing country from financial markets and make international transactions more difficult. However, this country’s government and central bank retain sovereignty over their monetary policy to make that decision without interference from institutions dominated by the Global North.
International institutions are often pitched as a way to level the global financial playing field and reduce inequalities caused by wide open markets. However, existing regulatory bodies do just the opposite, subjugating developing nations in the Global South by perpetuating legacies of colonialism and paternalistic tendencies. As the world mulls over the creation of an international cryptocurrency regulatory framework, perhaps the aphorism “less is more” is the most viable option for the international community to protect central bank autonomy and uplift the developing world.