Cryptocurrency and National Insecurity
“I wish I had better news,” said Lawrence H. Summers, Charles W. Eliot University Professor and Harvard president emeritus, in a revival of his former role as Treasury secretary, a post he held in the Clinton administration. “Fundamentally, our ability to sanction North Korea in a devastating way depends upon China’s cooperation,” Summers said. But he noted that was also largely true “before the digital yuan,” as the fictional currency was called.
Among jokes about the gender of the unnamed president in 2021 (and some jocular fake tweets from our current one), the council then discussed alternatives to sanctions, whether the U.S. should develop its own digital currency, and what America’s future might look like if the dollar’s economic dominance is indeed over.
“The competitiveness of the U.S. dollar is a matter of national security,” said Narula.
Ash Carter agreed. The director of the Belfer Center played secretary of defense, his real-life role in the Obama White House. “We can’t let stand the Chinese using this currency issue as a way of making inroads into what has traditionally been a strength of ours,” he said, noting China’s increasing sway throughout Asia and Africa. “We have to counter it in some way.”
How that could be achieved was a point of contention. Diplomacy was the first option proposed. “The president has to tell Xi Jinping that this is a core issue for the U.S.,” said former U.S. Ambassador Nicholas Burns, the Roy and Barbara Goodman Family Professor of the Practice of Diplomacy and International Relations at HKS, in his role as secretary of state. “The Chinese have created a problem for us by taking away our leverage with sanctions.”
More proactive steps were also recommended. “We should be creating a digital currency,” argued the Brunswick Group’s Jennifer Fowler, an expert in illicit finance and economic sanction issues, in her role as director of national intelligence.
“There is a financial technology revolution taking place, and we are about to miss it,” agreed Richard Verma, vice chairman and partner at the Asia Group, a D.C.-based strategic and business advisory firm, playing the ambassador to China. “My recommendation is we not try to quash this effort, but that we get on board.”
Citing the looming danger, Summers pushed for a more multifaceted response, including a public-private partnership to develop digital options, and called for a “hardening” of SWIFT, to make the current system more secure. “This is not a Kennedy School exercise for us,” he said, to laughter.
The team, which also included Meghan O’Sullivan, Jeane Kirkpatrick Professor of the Practice of International Affairs, as the vice president, and Gary Gensler, Professor of the Practice of Global Economics and Management, MIT Sloan School of Management, as assistant to the president for economic policy, ultimately agreed to make multiple recommendations. (Kennedy School students served as council staff, providing research, background, and talking points.) All agreed that diplomacy would have a place, with China informed that North Korea was a serious concern, and reached consensus on improving SWIFT security and the need for the U.S. to develop options for a digital currency.
“We need a strategy to resuscitate U.S. financial prowess,” concluded Rosenbach, as he readied to make the call to the president, ending the exercise.
Clea Simon is a Harvard correspondent. This articleis published courtesy of the Harvard Gazette, Harvard University’s official newspaper.
