The US has fallen behind in Crypto. It Can’t Afford to Fall Behind in AI – TradingView News

From the Industrial Revolution to the Digital Age, the United States has been defined by its spirit of entrepreneurship, innovation and creativity. American entrepreneurship has been a talent magnet and has attracted global minds to build and innovate in the US, myself included. Immigrants founded or co-founded 65% of the top AI companies in the United States.

The technological advances coming out of the United States have been a key driver of global innovation and leadership for decades, with the rest of the world adopting these ground-breaking technologies. But it now faces a potential threat to its rule – as a once undisputed leader in technological innovation, the US’s reputation and standing are now being challenged.

While the US remains a leader in venture capital funding for AI for now, PitchBook released a report in May 2024 showing that pre- and seed funding in US-based generative AI companies has seen a sharp decline, but companies in Asia and Europe is seeing a constant increase. But, we’ve seen it before. In crypto.

Crypto was once the technology championed to push us into the generation of Web3, with great promise only to falter in the US due to its hostile regulatory policies. The country’s actions – or rather lack of action – forces the question: How can it remain a global technology leader if it continues to miss the mark when it comes to new technology innovation booms? For the sake of AI innovation, we simply cannot allow the US to fall behind as it has with crypto.

The US’s crypto downfall

The US’s rise and fall with crypto is a cautionary tale that sets the scene for what could come in AI. In the early crypto days, the US was the land of promise with an abundance of startup and investment funding flowing into the space, creating room for innovation, growth and mass adoption. In recent years, this has slowed due to a lack of regulation and policy. The SEC began bringing in lawsuits and regulatory policies based on pre-crypto laws — essentially trying to fit a round peg into a square hole. They went to Consensys, Coinbase, Ripple and other companies that have a reliable reputation in Web3, just to make… what point? The lack of clear policies and regulations hinders progress, forcing these companies to devote resources to 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 how this and many others unfold to determine what regulations the SEC will consider regarding these companies, this is a sad, yet perfect example of how the US has stifled the growth and innovation of crypto through its policies. Meanwhile, governments in jurisdictions such as Switzerland, Singapore and Hong Kong have embraced crypto and used their forward-looking crypto policies to compete for coveted seats on the global tech leaderboard.

So let’s examine the contrast. Singapore has already established a robust regulatory framework that favors both local and international players to establish themselves in the country. Singapore acted quickly, in January 2024 they implemented the Singapore Payment Services Act which provided clarity to the industry and legitimized crypto on a nationwide scale. Singapore stands as a global crypto leader today, with the second most crypto transactions for companies headquartered in the first quarter of 2024, just behind the US, and a projected revenue in the crypto market is estimated to Reach $238.5 million 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 more than 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 started approving ETFs before the US, opening up regulated access to capital for the crypto industry.

Where the US stands on AI policy

So where the United States stands on crypto regulations is still evolving, but specifically in the past year artificial intelligence has taken center stage in technology. Let’s dive into where the United States stands so far in AI regulations.

AI policies seem to be following in the footsteps of crypto policy and similar challenges are emerging between the two industries. As of now, the United States is still home to a majority of large AI companies and research organizations. The risk lies in the likely possibility that the US’s current and proposed regulatory frameworks limit the growth of the AI ​​industry.

Let’s look again at Singapore as an example. Singapore is eyeing the leadership position for AI and it is 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.

Unlike other major technology trends, the speed of AI innovation is unparalleled. Builders ship new products, features, and apps every day. We as builders don’t even know where the ceiling of AI is, how would the government know the ceiling of AI? Setting limits on high-potential technologies is unwise and will drive talent out of the US (just like 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. Small AI is simply not equipped to carry the regulatory burden and bear the costs. Little AI’s task now is to build and explore the frontier of AI innovation.

This point is especially true for AI: unlike previous technological trends, building with AI now requires fewer people and fewer resources. Many solo developers ship the latest AI products. Many open source communities are exploring the frontier of AI. We are simply not equipped to handle regulatory burden, especially since the future of AI is full of unknowns.

Lessons from crypto

A deep dive into the regulatory frameworks to emerge from Singapore in both crypto and AI provides guidance to the US, which is why the country has become a hub for both industries. Singapore does not stifle innovation through regulation, it is mutually beneficial. The United States needs to learn from other countries to stay ahead when it comes to AI. AI regulation should be flexible and fair and not built to stifle innovation. Current and proposed regulatory frameworks in the US focus on problems and solutions for Big AI – the OpenAI, Claude, Midjourneys – of the world. For example, the recently passed California bill SB 1047 now awaiting Governor Newsom’s signature is now one of the most important regulatory frameworks on AI safety, but the efforts feel rushed and out of step with the unprecedented growth the industry will continue to see not. These general regulations hurt smaller AI (or Little AI) companies, which in turn creates a system that is not fair to both institutions and consumers.

Moving forward, policymakers need to take AI into account in general, and focus on policies that can be flexible so as not to stifle innovation. Politicians need to advocate for the growth and innovations of AI, as the benefits far outweigh the negatives… if we do it right. Like dr. Li Fei-Fei points out, too strict regulations can harm the US ecosystem. Instead, fostering an environment where innovation can flourish will help maintain US technological leadership.

Deduction

In general, AI is different: the speed of innovation is faster and we don’t know what we don’t know. AI requires fewer people to be involved, which has inspired a wave of solo developers and solo source communities worldwide. The US has undeniable leadership in terms of its influence in technology, but if its recent record continues, this could be the beginning of the dethronement. The lessons from the crypto boom should 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 election is coming up and both AI and crypto platforms are under a microscope. AI will continue to evolve. So can the US 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.