Unencrypted alternative payment systems pose a serious security threat to the United States, according to testimony presented Tuesday at a hearing of the U.S. House Financial Services Subcommittee on National Security, Development international and monetary policy. The alternative payments ecosystem should be considered as a whole, and crypto can enhance national security, the panellists said.
Scott Dueweke, Wilson Center teammate Told the US House Financial Services Subcommittee in written testimony, “By focusing solely on cryptocurrencies, we risk missing the forest for the trees.”
Money services businesses are heavily regulated in the United States, but those based outside of the country may not want to comply with US requirements, including Know Your Customer/Anti-Money Laundering, and they may be outside the reporting requirements of the United States and other Western countries, Dueweke said.
Dueweke recommended instituting greater open-source financial intelligence efforts as a way to counter the threat posed by Russia- and China-created SWIFT network alternatives and other threats. He said:
“The United States must follow our private sector’s global technology leadership in setting the EPA standards on the international stage. Whichever direction the U.S. government takes the digital dollar, […] it cannot wait to engage the world through international organizations.
While political goals inspire initiatives such as the formation of projects such as Russia’s financial message transfer system, a SWIFT alternative, and that country’s MIR bank card system, Dueweke said poverty is the main driver. the expansion of the alternative payment ecosystem.
A good day to do my civic duty. pic.twitter.com/O0NlMHPR9d
— Scott Dueweke (@Scott_Dueweke) September 20, 2022
Dueweke said more than 700 million people lack of adequate banking services, and the situation is aggravated by the practice of risk reduction, in which Western banks stop providing correspondent services to banks in poor regions. While security is the state’s motivation for the practice, a profit motive is often behind it, Dueweke said.
TRM Labs Head of Legal and Government Affairs Ari Redbord Told hearing that the US dollar stablecoins could bolster US national security. Because of the prestige and reliability of American fiat currency, Redbord said,
“One can imagine a world in which entrepreneurs create financial services products using a US dollar-backed stablecoin, even though those products otherwise have little to do with the United States.”