Entertaining crackdowns on Americans’ voluntary use of software has been a theme of policy leaders’ response to fraud charges at centralized crypto exchange FTX. Following last week’s FTX hearing, Senate Banking Committee Chairman Sherrod Brown (D‑OH) floated the idea of “maybe banning” crypto. Earlier this month, Commodity Futures Trading Commission Chairman Rostin Behnam considered how the federal government might help offshore crypto exchanges that block U.S. users “protect those firewalls.”
Banning open‐source software and barring the doors to the global Internet is no way to lead the free world. It shortsightedly undermines new ways of organizing civil society and commerce by prohibiting a technology that may prove key to developing robust cultural institutions over digital networks. Furthermore, it is inconsistent with American values, rejecting tools used to counter authoritarian overreach the world over. U.S. crypto policy must embrace, not eliminate, Americans’ freedom to write code, access information, and digitally organize.
A state‐sanctioned informational firewall is a tool of authoritarian regimes, whereas cryptographically secure software is a tool of democratic civil society. To overcome state censorship and access dissident content, Chinese anti‐lockdown protesters had to bypass “China’s Great Firewall” to reach American websites. Blockchain technology, by contrast, allowed protesters in Hong Kong to preserve the archives of a pro‐democracy newspaper that authorities pressured to shut down.
While crypto has been used by repressive actors themselves, such as North Korean state‐sponsored hackers, a blanket U.S. crypto ban would not distinguish between those using technology to subsidize human rights violations and those using it to combat them. One also suspects such a ban would do more to harm law‐abiding software developers and civic innovators in the U.S. than to thwart the ambitions of terrorists and their state sponsors who respect no laws.
When it comes to the role that open‐source and cryptographically secure networks will play in the future of civic life and geopolitics, one of the most formidable analyses comes from tech entrepreneur and investor Balaji Srinivasan’s The Network State.
In a book that combines technological forecasting, cultural criticism, and political theory, Srinivasan describes how social movements can leverage digital networks to organize online communities devoted to a shared belief, build new institutions, and, most provocatively, found new polities. Srinivasan defines these polities, or “network states,” as:
[S]ocial network[s] with a moral innovation, a sense of national consciousness, a recognized founder, a capacity for collective action, an in‐person level of civility, an integrated cryptocurrency, a consensual government limited by a social smart contract, an archipelago of crowdfunded physical territories, a virtual capital, and an on‐chain census that proves a large enough population, income, and real‐estate footprint to attain a measure of diplomatic recognition.
Srinivasan sees crypto as key to this potential phenomenon because “only decentralized networks can give rise to network states.” Unlike centralized networks, decentralized ones provide exit rights that allow users to opt out of services while still holding onto their digital assets. In addition, integrated cryptocurrency blockchains provide a recordkeeping and payment system that resists tampering and censorship. Trustworthy records are key because, as Srinivasan argues, studying history is essential to making sense of and building in the present. Hence Big Brother’s eagerness to destroy or falsify the historical record in Orwell’s 1984. Moreover, by using smart contracts (self‐executing software that can document individuals’ consent and limit administrators’ discretion), network states can incorporate the idea of the voluntary social contract.
The Network State makes bold claims and predictions, and Srinivasan is frank about the limits of projections and potential failures of both theories and technologies. Nonetheless, dramatic policy proposals—like banning crypto—require exploring broad implications.
While some might view the prospect of new network states competing with America as another reason to ban crypto, attempting such a ban could provide the ultimate justification for bringing such network states to fruition. (Srinivasan explores the related idea of a Bitcoin seizure triggering political conflict that contributes to the appeal of network states.)
But even if one fully accepts the possibility of network states, such states may bring about more benign (or salutary) impacts than existential risks: think chains of special economic zones in the developing world, as opposed to peer competitors seceding from or displacing the Union.
For that reason, one of the greatest lessons of The Network State for U.S. crypto policy is the potential benefits and vitality that a crypto ban would sap from America itself. Along the path to network states, Srinivasan traces intermediate outcomes short of sovereignty, including “network unions” that leverage crypto networks to help people organize around common goals.
There’s a version of this idea that should sound familiar to students of American history. Socially, network unions can be tools of Tocquevillian civil society of every stripe—from socially‐conservative Benedict Option communities to libertarian Galt’s Gulches to progressive communes. Culturally, regardless of whether one plans to spend any time in the metaverse, an open‐source version of the idea has far greater creative potential than a walled garden. Economically, network unions can form the bases for incorporating new real‐world townships with zoning and other development reforms. (When combined with physical property, network unions become “network archipelagos” in Srinivasan’s phrasing.) Politically, network unions can facilitate organizing on any part of the ideological spectrum, allowing users to communicate with one another and track campaign goals using trustworthy channels and ledgers without relying on third‐party applications.
Regardless of whether one buys into the potential of crypto, let alone network unions or network states, an outright crypto ban would destroy much of that possible upside without any guarantee of mitigating risks. By contrast, crypto policy tailored to relevant risks can help capture potential benefits from novel institutional designs while protecting against known downsides. Moreover, risk‐based crypto policy, unlike a crypto ban, would be consistent with an American tradition of technological and cultural dynamism that we’ve struggled more to reclaim than lose in recent years. And, ultimately, a crypto‐permissive policy stands against the censoriousness of Great Firewalls and for Americans’ ability to write, use, and organize with software as free people.
