Czarist America Looks to Conquer Crypto

By Max Gulker

We Americans have lived under the thumb of the czars for over eighty years. It is time to throw off the shackles of their cronyism and incompetence. While they sit in their palatial office buildings in the capitol, giving orders from on high, many of the problems they claim to solve only get worse.

Before you think I’ve gone more than a little crazy, recall all the times you’ve heard some executive-branch employee referred to as a czar. To be fair, that’s never been an official title, but it’s been in common usage since it was originated by executive-power enthusiast Franklin D. Roosevelt. Even if the term is informal, it confirms our reflexive tendency toward top-down control. We have a problem? There’s a czar for that.

Get ready, crypto community, because the czars are coming for you. On Monday, June 4, the Securities and Exchange Commission appointed Valerie Szczepanik to a new position: “associate director of the Division of Corporation Finance and senior advisor for digital assets and innovation,” known informally as the “crypto czar.”

This appointment should be an occasion for the crypto community to take a hard and pragmatic look at what regulations lie down the road and how they might achieve the best possible results. But first, let’s take a brief look at the history of czarism in America.

The House of Roosevelt

The term “czar” was applied to no fewer than eleven officials in FDR’s White House, including the economic czar and — I’m not kidding — the czar of information and the czar of censorship (I really hope the latter czar isn’t reading this right now).

The term has been used for officials in every administration (with the exception of Kennedy) since, though with widely varying frequency. Based on data from Wikipedia, I’ve prepared the chart below on our czarist history.

President Reagan, hero of limited government and never a connoisseur of anything Russian, had only one czar. Given the “Just Say No” climate of the ’80s, it was a drug czar: Carlton Turner. On the other end of the spectrum, Presidents George W. Bush and Barack Obama would have made even the Romanovs proud, respectively appointing 33 and 38 officials that came to be known as czars.

I urge you all to go to the Wikipedia page and peruse the list for your favorite czar. Mine is, by far, the Asian-carp czar.

The increasing use of czars runs parallel to increases in other outlets of presidential power, such as executive orders. It seems our political discourse is stuck with an assumption that problems require a single expert in Washington, D.C., guiding a policy from the top down. It’s an assumption that’s increasingly outdated and dangerous.

Valerie the Great, or Valerie the Terrible?

What does this mean for cryptocurrencies? First, it means the government is starting to take them more seriously, a testament to their meteoric rise. Second, it’s time to check our political philosophies at the door and get realistic about what types of regulation can and will happen.

Too often, people in the crypto community focus on either a utopia with no regulation, or an Armageddon where cryptocurrencies are outright banned. I don’t think either will happen, but there are challenging times ahead.

Economists often talk about rent seeking, where large corporations use their money, power, and connections to extract preferential treatment and regulation. In the crypto czar, such corporations now have a point of contact for rent seeking.

But who in the crypto community has the money, power, and connections to engage in rent seeking? This is where the radical decentralization of many cryptocurrencies poses a challenge. Large banks and other incumbent firms with uses for blockchains and tokens will no doubt have their voices heard. But a constructive conversation needs to begin in the more decentralized crypto community.

At a conference panel last winter, I said that entrepreneurs should be looking for ways that crypto can exist alongside current fiat money. Let’s just say I didn’t get a standing ovation. But iIf the small developers, entrepreneurs, and enthusiasts that form the crypto community want their voices heard, they’ll need to seek an audience with the czar.

Sign up here to be notified of new articles from Max Gulker and AIER.

Max Gulker

Max Gulker is an economist and writer who joined AIER in 2015. His research focuses on two main areas: policy and technology. On the policy side, Gulker looks at how issues like poverty and access to education can be addressed with voluntary, decentralized approaches that don’t interfere with free markets. On technology, Gulker is interested in emerging fields like blockchain and cryptocurrencies, competitive issues raised by tech giants such as Facebook and Google, and the sharing economy. Gulker frequently appears at conferences, on podcasts, and on television. Gulker holds a PhD in economics from Stanford University and a BA in economics from the University of Michigan. Prior to AIER, Max spent time in the private sector, consulting with large technology and financial firms on antitrust and other litigation. Follow @maxgAIER.