Technology has always moved faster than government.
We are seeing that today with artificial intelligence, where the speed and power of technological change have forced policymakers to confront questions that seemed theoretical only a few years ago. But this is hardly the first time technology has reshaped our society and challenged government to keep up.
The same thing has happened repeatedly in our financial markets.
Electronic trading. Automated mortgage underwriting. Algorithmic trading. Mobile banking. Each was once considered cutting edge. Each transformed the financial system. And each eventually forced regulators to rethink rules written for an earlier era.
We are at that point again with digital assets and blockchain technology.
The promise is significant. This technology can make parts of our financial system faster, more efficient, more transparent and more accessible. But the United States has been painfully slow to create a comprehensive regulatory framework around it. Other countries are moving faster.
That should concern us.
The modern digital-asset era began with Bitcoin in 2009 and the blockchain infrastructure that followed. Like many new technologies, it developed faster than the rules governing it. It was used for legitimate innovation, but also by bad actors for illicit purposes, including criminal transactions and efforts to evade sanctions.
That abuse was also a testament to the technology’s power.
In 2011, as governor of New York, I established the New York State Department of Financial Services which went on to propose what became known as the BitLicense in 2014, one of the first regulatory frameworks in the country specifically designed for virtual-currency businesses. The regulation took effect the following year and established rules involving consumer protection, anti-money-laundering compliance and cybersecurity.
The theory was simple: innovation should be encouraged, but it should also be regulated.
More than a decade later, digital assets have become a significant part of the global financial system. Hundreds of millions of people around the world own cryptocurrency, including tens of millions of Americans. At the same time, blockchain technology is moving beyond crypto and into traditional finance.
I now serve on the board of OKX, a leading global financial-technology company, and co-chair a joint venture between OKX and Intercontinental Exchange, the parent company of the New York Stock Exchange. We are developing infrastructure for tokenized NYSE equities and other blockchain-enabled financial products. I therefore have a direct interest in getting this regulatory framework right — and in creating the kind of clear, predictable rules that allow responsible companies in this industry to invest and grow. I have also seen firsthand what regulatory uncertainty means when companies are deciding where to build.
Tokenization is the next frontier.
A security that once existed only within traditional financial-market infrastructure can now be represented digitally on a blockchain. Over time, that can reduce layers of intermediaries, allow markets to operate more continuously and make financial products more accessible across geographic boundaries.
The Securities and Exchange Commission took an important step on Sept. 17 when it created an “Innovation Exemption” allowing limited trading of tokenized U.S. stocks on qualifying onchain venues.
That is progress.
But it also highlights a larger problem: the United States still lacks a comprehensive and durable statutory framework governing the digital-asset economy.
Two days before the SEC acted, the Senate failed to advance the Digital Asset Market Clarity Act. The legislation was intended to establish clearer rules for digital assets and define the respective responsibilities of the SEC and Commodity Futures Trading Commission.
There were real disagreements over consumer protection, banking, ethics, illicit finance and regulatory authority. Those issues matter.
But none of them should be beyond resolution if there is sufficient political will.
Technology is not waiting for Congress.
Companies are innovating now. Investors are making decisions now. Governments around the world are writing rules now.
The cost of American inaction is twofold.
First, there is the issue of consumer and market protection.
Digital-asset companies will continue to innovate, but today they are doing so under a patchwork of laws, regulations and agency interpretations. At the same time, regulators are trying to oversee technology that is evolving faster than the rules governing it.
Make no mistake: this technology is powerful.
Used responsibly, it can make our financial system faster and more efficient. In the hands of unscrupulous operators, it can also do real harm. Its power should not be underestimated.
The lesson is not that innovation should stop. It is that innovation and regulation have to move together.
The second cost is economic.
Legitimate companies want to comply with government regulation. But they need to know what the rules are.
Businesses can plan around tough rules. They can adjust to strict rules. What they cannot easily plan around is uncertainty.
I have seen that firsthand while traveling in Europe on behalf of OKX and meeting with regulators and financial-market participants.
Europe has moved ahead of the United States in important areas of digital-asset regulation. Through the Markets in Crypto-Assets regulation, or MiCA, the European Union has established a common framework across its member states for significant parts of the crypto economy.
Europe has not solved every problem, and its system will continue to evolve.
But companies have something they desperately want: greater predictability.
How ironic.
The European Union has established a common framework across 27 member states, while the United States has yet to find agreement between two houses of Congress.
That has consequences.
Companies deciding where to invest, hire, build trading infrastructure and launch new products care deeply about the regulatory environment. They want to know what the rules will be not only next month, but five years from now.
If Europe offers greater predictability, more companies will build and expand there.
That means jobs. Investment. Technology. Infrastructure. Tax revenue.
It becomes an economic advantage.
The United States became the world’s economic and financial capital, and Wall Street became its iconic symbol. For generations, our financial markets succeeded because they had both the foresight to embrace new technology and the wisdom to regulate it.
We should not assume that advantage is permanent.
The SEC’s Innovation Exemption is an important step. It allows the market to test new technology within defined guardrails. But an agency exemption is not a substitute for comprehensive legislation. Exemptions can expire. Regulations can change. Companies making long-term investments need greater certainty.
This debate is therefore about much more than cryptocurrency.
It is about where the next generation of financial infrastructure will be built.
It is about where companies will invest, where they will create jobs and where new technologies will be developed.
And ultimately, it is about whether the United States intends to lead the future of finance or watch other countries build it first.
It is not too late. Global capital markets still favor the United States.
But the clock is ticking.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
