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Last November, digital assets reached a collective market cap of more than $3 trillion, marking the industry as an essential element of the global economy. To show how much crypto assets have permeated American society, a White House fact sheet states that more than 40 million Americans, which is 16% of the population, use cryptocurrencies to invest, trade, or make payments. However, there has been a lot of concern about how cryptocurrencies can be used to hide money, run illegal businesses, and abet corruption. Cryptocurrency has become even more critical because Russia tried to use it to get around sanctions from the United States and the European Union (EU) because it invaded Ukraine. Russia’s actions have made the need to regulate the crypto space even more significant.
Heading Towards Cryptocurrency Adoption?
Regulators and oversight bodies such as the Commodity Futures Trading Commission (CFTC), the Financial Stability Oversight Council (FSOC), and the Securities and Exchange Commission (SEC) have spent the last few years bootstrapping existing laws to regulate the nascent crypto market. Unfortunately, the half measures have proven woefully inadequate in policing the rapidly growing industry. On March 9, 2022, President Joe Biden signed an executive order that was the most comprehensive way the U.S. government had ever tried to regulate crypto. The Executive Order on Ensuring Responsible Development of Digital Assets does not prescribe a regulatory framework or require the issuance of new rules. However, it asks various government agencies to recommend potential legislative and regulatory actions regarding crypto assets. Any rules and regulations from the reports and recommendations will then be subjected to the Administrative Procedure Act to allow the public to make submissions. President Biden’s order contemplates a future in which cryptocurrencies become vital components of the global financial markets and payment systems and are therefore required to be regulated in the same manner as their traditional counterparts. The order is also a tacit acknowledgment that blockchain-based digital assets are here to stay. It is also a step towards legitimizing and regulating their usage in everyday commerce in the United States and worldwide.
Key Features Of The Executive Order
President Biden’s executive order lays out a series of tasks across a broad spectrum of offices and agencies, including the U.S. Treasury, the FSOC, the Commerce Department, and the Federal Reserve. For example, the Treasury Department, in conjunction with other departments, will issue recommendations to address the protection of consumers and investors in the crypto space. The Treasury will also produce reports on the future of money and the conditions driving the widespread adoption of crypto assets. The Attorney-General, the Department of Homeland Security, and the Treasury will develop a national strategy to counter crimes facilitated by crypto. The Commerce Department will set up a way to use crypto and blockchain technology to help keep the United States at the top of the global financial system. On its part, the Federal Reserve will seek to develop a central bank digital currency (CBDC) and an accompanying strategic plan to guide its launch and implementation. Finally, the FSOC will identify the economic risks of cryptocurrencies and recommend proposals to mitigate existing regulatory gaps in the crypto space.
Executive Order Was Not The Crackdown People Feared
The Biden administration had spent the months before issuing the executive order warning about impending oversight. As such, many industry observers expected a heavy crackdown on crypto. Instead, the order struck a conciliatory note and planned to explore and solve many of the contentious issues plaguing crypto. The order also sought to answer questions about the future of cryptocurrencies in the United States. President Biden’s order is more focused on updating America’s financial regulations to address digital assets rather than trying to fight them. The underlying message seems to be that the U.S. government recognizes crypto’s legitimacy, seriousness, and importance to America’s economy and society. Many crypto enthusiasts feared that the government would try to hamstring the industry. However, given the way the order is structured, crypto advocates and lobby groups will get the chance to influence the trajectory of whatever regulatory proposals come out of the order in the public participation portion of the process. In that way, crypto users might be able to add to and improve the American crypto space and the global crypto industry as a whole.
Final Thoughts
Because of the executive order, the crypto market will keep growing and maturing. In the long run, individuals and institutional investors will be able to invest in the crypto market more efficiently. The order will be pivotal in creating the regulatory clarity needed for the mass adoption of cryptocurrencies and other associated digital assets. It could also mean more excellent stability in the crypto market, beset by so much volatility since its inception. But as analysts suggest, President Biden’s executive order will only be successful if the agencies tasked with coming up with recommendations rise above parochial jurisdictional battles to create a coherent overarching public policy. Generally, the Biden administration believes that crypto might boost America’s competitiveness in the global economy. The President’s order has more positives than negatives for startups issuing digital assets.