Skeptical about crypto? All the more reason to keep it in the U.S.

Bloomberg News

It's a decades-old truth that the American dollar dominates other global currencies. But while the United States has long commanded the traditional global financial market, we might be fumbling our chance to maintain control over the nascent digital assets space.

When it comes to crypto, U.S. regulators have been anything but clear and consistent. And uncertainty over the U.S. regulatory landscape is prompting huge exchanges to consider moving their operations overseas. When asked by Politico about this risk, Securities and Exchange Commission Chairman Gary Gensler recently remarked that, "[w]e lose more if investors get harmed here." 

It's true that we stand to lose a lot if the U.S. allows our consumers to be harmed by fraudulent or irresponsible crypto institutions. But that is exactly why we should want them to stay stateside. 

While some crypto-skeptical policymakers welcome the idea of these institutions exiting the U.S., they're failing to see the bigger picture. Giving up our jurisdiction over this $800 billion industry would not only harm American consumers, but it would also damage our geopolitical power in the process.

Plenty of Democrats are skeptical of crypto, and for good reason. The industry has its share of bad actors and financial risks. But the fact remains that Americans will invest in digital assets no matter what politicians and regulators think of them, and these exchanges will retain their global influence regardless of where they're headquartered. 

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Lawmakers and regulators don't have to like that reality to see there are good reasons to keep the industry under the federal government's watchful eye. Agencies like the SEC will protect American consumers far more effectively than any international regulatory body or foreign legal system. Much like our dollar dominance, the SEC enjoys confidence as a leading regulatory institution among Americans and international investors. It's better for American consumers to have the security of the SEC's oversight over digital-asset services than to hope that foreign regulators look out for our consumers.

Less discussed, but maybe even more critical, is the national security risk we'd take on in pushing crypto markets overseas. 

Digital currencies offer an accessible, global financial market separate from traditional banks, and losing our regulatory influence over that market risks geopolitical consequences. Take our stake in the Russia-Ukraine war, for example. Shortly after Vladimir Putin ordered an invasion of Ukraine last year, the U.S. government imposed economic sanctions on Russia that included instructions for American cryptocurrency exchanges to block Russian users from handling currency through their services.

While U.S.-based crypto exchanges abided by our sanctions, international exchanges like Binance refused, continuing to serve Russian users and creating a potential loophole for Russian actors to finance war operations through their markets. 

Even if the SEC maintains its extraterritorial authority to regulate international businesses that impact Americans, its ability to actually execute that authority is limited by its resources. The agency has long been underfunded, and if these exchanges move overseas, it will have even less authority and ability to stop bad actors in the market. 

The theoretical control Chairman Gensler seems to think he'll retain after driving crypto exchanges away isn't going to work in practice, and once these companies are gone, we'll have lost the guarantee that we can exert any meaningful influence on a major financial industry that's around to stay.

The bottom line? Throwing away our jurisdiction over an emerging global financial industry, no matter its flaws, jeopardizes our influence on the world stage.

U.S. investors aren't going to stop putting their money in crypto exchanges, and, ultimately, the SEC has a responsibility — and a unique ability — to protect our consumers. It's a far better idea to bring the industry under the federal government's thumb than drive it out of the U.S. and hope that other countries adequately look out for American interests.