The U.S. Fell Behind in Crypto. It Cannot Afford to Fall Behind in AI
From the Industrial Revolution to the Digital Age, the United States has been defined by its spirit for entrepreneurship, innovation, and creativity. American entrepreneurship has been a talent magnet and attracted global minds to build and innovate in the U.S., myself included. Immigrants have founded or co-founded 65% of the top AI companies in the United States.
The technological advancements that have come from the United States have been a key driver for global innovation and leadership for decades, with the rest of the world adopting these groundbreaking technologies. But it now faces a potential threat to its reign – as a once undisputed leader in technological innovation, the U.S.’s reputation and standing is now being challenged.
While the U.S. for now remains a leader in venture capital funding for AI, in May 2024, PitchBook released a report showing that pre-seed and seed funding in U.S.-based generative AI companies saw a sharp decline, but companies in Asia and Europe are seeing a steady increase. But, we’ve seen this before. In crypto.
Crypto was once the technology being championed to push us into the generation of Web3, seeing great promise only to falter in the U.S. because of its hostile regulatory policies. The country’s actions – or inactions, rather – force the question: How can it stay a global tech leader if it continues to miss the mark when it comes to new tech innovation booms? For the sake of AI innovation, we simply cannot let the U.S. fall behind like it has with crypto.
The U.S.’s crypto downfall
The U.S.’s rise and fall with crypto is a cautionary tale that sets the scene for what could be to come in AI. In early crypto days, the U.S. was the promise land with a plethora of startups and investment funding flowing into the space creating room for innovation, growth and mass adoption. In recent years, this has slowed down due to a lack of regulation and policy. The SEC started bringing in lawsuits and regulatory policies based on pre-crypto laws – essentially trying to fit a round peg into a square hole. They went after Consensys, Coinbase, Ripple and other companies that have a reputable standing in Web3, just to make… what point? The lack of clear policies and regulation hinders progress, forcing these companies to spend resources on legal battles, while pushing companies and talent elsewhere to continue building the decentralized dream.
Not long ago, OpenSea received a Wells Notice from the SEC, where the regulator argued that NFTs are a security. While we have to watch this and many others unfold to determine what regulations the SEC is going to deem across these companies, it’s a sad, yet perfect example of how the U.S. has stifled the growth and innovation of crypto through its policies. Meanwhile, governments in jurisdictions like Switzerland, Singapore, and Hong Kong have embraced crypto and used their forward-looking crypto policies to vie for coveted seats on the global tech leaderboard.
So let’s examine the contrast. Singapore has already established a robust regulatory framework that benefits both local and international players to settle down in the country. Singapore acted quickly, in January 2024, they implemented the Singapore Payment Services Act which provided the industry with clarity and legitimized crypto on a country-wide scale. Singapore stands today as a global crypto leader, seeing the second most crypto deals for companies headquartered there in Q1 2024, just behind the U.S., and a projected revenue in the crypto market was estimated to reach $238.5M in 2024.
Other leaders in crypto have shown similar policy implementations. Switzerland regulates crypto through the Swiss Financial Market Supervisory Authority, introduced the “Blockchain Act” and in turn attracted over 1,000 new companies to the country. Meanwhile, Hong Kong serves as an interesting example as they have no official crypto laws, but do have crypto regulations and were, before the U.S., beginning to approve ETFs, opening up regulated access to capital for the crypto industry.
Where the U.S. stand on AI policy
So, where United States stands on crypto regulations is ever-evolving but over the last year specifically, artificial intelligence has taken center stage in tech. Let’s dive into where the United States stands in AI regulations to date.
AI policies seem to be following in the footsteps of crypto policies and similar challenges among the two industries are arising. As of now, the United States is still the home to a majority of major AI companies and research organizations. The risk sits in the likely possibility that U.S.’s current and proposed regulatory frameworks cap the growth of the AI industry.
Let’s look at Singapore as an example again. Singapore has been eyeing the leadership position for AI and its being noticed. Its recipe for success seems to be working again, as the country has created balanced strategies by creating guidelines for building responsible AI while pushing for continued innovation.
In contrast to other major tech trends, the speed of AI innovation is unparalleled. Builders are shipping new products, features, and applications everyday. We as builders don’t even know where the ceiling of AI is, how would the government know the ceiling of AI? Setting limits for high-potential technologies is unwise and will drive talent out of the US (just like what regulations did to crypto).
In reality, Little AI is going to bear most of the burden of AI regulations. Unlike Big AI, which has lobbyists to work with regulators. Little AI simply are not equipped to bear the regulatory burden and endure the cost. The job of Little AI now is to build and to explore the frontier of AI innovation.
This point is particularly true for AI: unlike past tech trends, it requires fewer humans and less resources to build with AI now. Many solo developers are shipping cutting-edge AI products. Many open-source communities are exploring the frontier of AI. We are simply not equipped to deal with regulatory burden, especially as the future of AI is packed with unknowns.
Lessons from crypto
A deep dive into the regulatory frameworks to come out of Singapore in both crypto and AI offers guidance to the U.S., which is why the country has become a hub for both industries. Singapore does not stifle innovation through regulation, they are mutually beneficial. The United States must learn from other countries to stay ahead when it comes to AI. AI regulation needs to be flexible and fair and not be built to stifle innovation. Current and proposed regulatory frameworks in the U.S. focus on problems and solutions for Big AI – the OpenAI, Claude, Midjourneys – of the world. For example, the just passed California bill SB 1047 now awaiting Governor Newsom’s signature is now one of the most significant regulatory frameworks on AI safety, but the efforts feel hasty and not matching the unparalleled growth the industry will continue to see. These blanket regulations hurt smaller AI (or Little AI) companies, in turn creating a system that’s not fair to both institutions and consumers alike.
Moving forward, policy makers need to take AI generally into account, focusing on policies that can be flexible in order to not hinder innovation. Politicians should advocate for the growth and innovations of AI as the benefits far outweigh the negatives… if we do it right. As Dr. Li Fei-Fei points out, overly stringent regulations could harm the U.S. ecosystem. Instead, fostering an environment where innovation can flourish will help maintain the U.S.’s tech leadership.
Conclusion
Overall, AI is different: the speed of innovation is faster and we don’t know what we don’t know. AI requires fewer humans to be involved, which inspired a wave of solo developers and solo source communities worldwide. The U.S. has undeniable leadership when it comes to its influence in technology but if its recent track record continues, this could be the beginning of the dethroning. The lessons from the crypto boom need to serve as a warning: the only answer is to build policies responsibly, without hindering innovation or progress. I’m not saying it’s an easy feat, but it can’t be one that’s overlooked. The November elections are coming up and both AI and crypto platforms are under a microscope. AI will continue to evolve. So can the U.S. keep up?
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.
Edited by Benjamin Schiller.
