President Joe Biden signed an executive order on March 9 that brings a new level of government oversight to cryptocurrency, asking the Federal Reserve to explore creating its own digital currency.
White House advisors described the move as the country’s first comprehensive federal digital assets strategy. Some crypto enthusiasts are relieved that the order contained no surprises.
The explosive popularity of cryptocurrency is an opportunity to examine the risks and benefits of digital assets, an unnamed senior administration official told the Associated Press.
The combined value of all crypto assets in circulation was close to $3 trillion in the fourth quarter of 2021 and $1.76 trillion as of this writing.
The order will help minimize risk to financial stability and national security, according to Treasury Secretary Janet Yellen. It will “promote a fairer, more inclusive, and more efficient financial system” while countering illicit finance, Yellen said.
The executive order will help keep the U.S. competitive, said top Biden economic and national security advisers, Brian Deese and Jake Sullivan, in a joint statement. It will “help position the U.S. to keep playing a leading role in the innovation and governance of the digital assets ecosystem at home and abroad, in a way that … is consistent with our democratic values and advances U.S. global competitiveness.”
Here are five things to know about Biden’s new executive order.
The impending cloud of anticipated crypto regulations hanging over investors and crypto-related businesses generated a great deal of fear, uncertainty and doubt (FUD) on Twitter over what the order would contain, The Verge reported.
However, the White House plan for digital asset regulation didn’t contain a lot of surprises. In fact, it doesn’t say much — a plus for the industry because it buys time. “The list of issues are ones that lawmakers and industry insiders have been discussing already,” said Kristin Smith, executive director of the Blockchain Association industry group.
A previous effort to regulate cryptocurrency was suspended after the Financial Crimes Enforcement Network (FINCEN) tried to push new proposed regulations under the Trump administration. However, proposed tax changes affecting crypto transactions in the 2021 infrastructure bill passed.
Biden’s executive order gives the crypto community cause to celebrate. “It legitimizes digital assets by treating them as worthy of measured regulation,” wrote Elizabeth Lopatto, deputy editor of The Verge. “Its approach sidelines cryptocurrency’s most dogged skeptics and leaves people who think crypto is planet-destroying nonsense — and there are a lot of those people! — with few friends in D.C. to represent their point of view.”
The Biden order also specifically instructs U.S. government agencies to find ways to minimize risks posed by illicit uses for cryptocurrency. However, it also tells the Department of Commerce to protect U.S. innovation and competitiveness and not regulate them out of existence.
The executive order falls short of being a clear roadmap but the emphasis on innovation and “responsible development” suggests that a crackdown on cryptocurrency is unlikely.
The executive order contains something for both crytpo fans and skeptics, according to a Coindesk opinion piece.
Arguably the staunchest critic of the crypto industry, Sen. Elizabeth Warren (D-Mass.), praised the executive order, saying that Biden is “right to spotlight crypto’s risks and we need strong rules before it’s too late.”
Crypto skeptics see the order as a step back, WSJ reported. Most government agencies have at least 180 days to produce their reports in compliance with the executive order. Any consequential policy decisions will likely be delayed until after the November midterm elections, said Lee Reiners, executive director of Duke University School of Law’s Global Financial Markets Center.
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“Leading up to this executive order, the narrative that had been circulating was that the administration was set to crack down on crypto,” Reiners said. “This executive order is a complete 180 from that. This is as close to an embrace of crypto as you could have hoped for from this Biden administration, if you’re pro-crypto.”
Financial regulators have been cautious about cryptocurrency for years. Biden’s executive order marks the first time the White House has formally weighed in on crypto regulation, Wall Street Journal reported.
The price of Bitcoin rose almost 9 percent on Wednesday evening as details from the executive order emerged, before falling again on Thursday along with stock futures.
The crypto industry has lobbied D.C. aggressively against the regulation of digital assets, with 320 lobbyists in 2021 compared to 115 in 2018, according to a report by the progressive advocacy group Public Citizen.
Biden’s executive order comes as U.S. officials are increasingly concerned that Russia may use cryptocurrency to successfully avoid the impact of sanctions imposed on banks, oligarchs and the oil industry, which provided 39 percent of Russia’s federal budget in 2019.
Visa, Mastercard and PayPal suspended services in Russia and credit and debit cards issued by Russian banks will no longer work outside Russia. Russian businesses won’t be able to accept cards issued from outside the country.
A central bank digital currency (CBDC) is not regarded as crypto since it is regulated by a central authority but having one would put the U.S. on some kind of footing with China and Russia.
“The US government, among others, is trying to get in on the digital asset boom, seeking to regulate and reinvent a sector operating largely out of its reach,” Al Jazeera reported.
China debuted its CBDC, the digital yuan, during the Beijing Winter Olympic Games.
“Sanctions only work if people are using your currency,” Al Jazeera reported. “But if Russia and China decide they’re going to use Beijing’s digital central bank digital currency or Moscow decides to create its own, sanctions will no longer pack a punch.”