Here’s Why Balaji Says Crypto Is America’s “Backup Plan”

Former Coinbase CTO Balaji Srinivasan has argued that cryptocurrency is more than finance. In his view, it’s a system-level fail-safe for the values America claims to run on.

In an interview on the Network State Podcast, Srinivasan framed the crypto industry as a kind of institutional “backup drive” that keeps functioning even when legacy systems strain or break. His view: when traditional institutions lose trust, code-based blockchain systems can preserve rules, coordination, and fairness in a way that’s harder to manipulate.

From Common Law to Constitutions to Smart Contracts

Srinivasan describes institutional evolution as a sequence starting with common law (custom and precedent), proceeding with constitutions (formal national rules), and ending with smart contracts (internet-native rules enforced by code). As he explained:

“Crypto is the backup of American values. But it’s also the next version of it. Like you go from Britain to America to the internet, you go from common law to constitution to smart contract. It’s like version 3.0.”

The punchline is simple: rules become more legible and enforceable as they move into software. In a smart contract world, he argues, people gain something close to “formal equality” because the same rules apply at the protocol layer, regardless of who you are or where you’re from.

“A Turk, an Indian, a Japanese, a Brazilian, we’re all equal on the internet. We have exactly the same terms on a smart contract. You might be a second-class citizen on an H-1B visa, but you’re a first-class citizen on the internet with TCP/IP.”

“Rule of Code” is the Equalizer

One of the strongest parts of his argument is psychological, as opposed to technical. In traditional systems, your outcomes can depend on gatekeepers like banks, regulators, borders, or status. In internet-native systems, the rules are explicit and automated, and the mechanism matters.

Srinivasan’s underlying claim is that crypto can preserve a version of American ideals, things like predictable rules, property rights, and freedom to transact, even if real-world institutions become inconsistent, politicized, or unstable.

“We’re in the middle of a giant mark-to-market on the West where all of the G7 is simultaneously in the throws of sovereign debt crisis.”

Why Balaji Thinks Crypto Order Can Survive Real-World Turbulence

Srinivasan also pointed to the idea that digital systems keep operating during periods of real-world disruption.

“Even in places where they literally have civil war, you still somehow have cell phone videos. Because the internet was built to resist a nuclear attack.”

His broader “network state” thesis argues that online communities can coordinate, build capital, and form governance structures in the cloud, and then increasingly manifest in physical space through real-world hubs, jurisdictions, and membership-based communities.

In that framework, crypto becomes infrastructure for coordination, a way to organize value, rules, identity, and incentives across borders.

The Big Takeaway: Crypto as Institutional Insurance

Srinivasan’s argument is essentially that crypto can function like a reserve system when institutions lose credibility, a rules engine when legal systems become contested, and a coordination layer when societies fragment into competing realities.

Ultimately, he frames crypto as insurance against institutional failure and a blueprint for what comes after.