Does Biden’s Executive Order On Cryptoassets Make A Difference?

President Joe Biden today signed an executive order to develop a framework and formulate a ‘whole-of-government approach’ to cryptocurrencies. The order tasks government agencies with coordinating amongst themselves to focus on six key areas of research: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.

While individual agencies within the U.S government have conducted hearings, released studies, and issued notices, there has been little coordination amongst them to develop a cohesive policy approach to the asset class. Today’s order could be the first attempt in the government to devise a common vision for cryptocurrencies.  

The crypto community is split in its reaction to the President’s order. Jeremy Allaire, founder of Circle – a payments technology and stablecoin company – called the order a “watershed moment” that was similar to the 1996 Telecommunications Act that paved the way for development of the Internet ecosystem. Bill Barhydt, CEO of Abra – a cryptocurrency trading and lending platform – called it a “big nothing burger with a side of psychobabble”. The effect of Biden’s order on the cryptocurrency ecosystem might lie somewhere in between these two extreme reactions.   

For most of the decade after they were introduced to the world, cryptocurrencies lived in regulatory purgatory, becoming a target for attacks and criticisms from experts and government agencies. But their price run up in 2017 and greater awareness about their potential use in economies changed that. Today’s executive order brings further clarity to the government’s stance towards the new asset class but it may not signal a dramatic change.

Many federal agencies have already conducted hearings, released studies, and issued noticed about cryptocurrencies over the years. While Biden’s order helps coordinate their future efforts, it also extends the extends the timeframe for cryptocurrency regulation further down the road.

Many of the topics discussed in the executive order have been issues for some time now. For example, money laundering, which is part of illicit finance, through crypto networks peaked right before the pandemic in 2019. A delay in regulation of crypto networks, especially as its prices peak and the so-called decentralized finance (DeFi) networks grow in popularity, could further magnify risks for investors in the asset class. Central Bank Digital Currencies (CBDC) are already being investigated by several governments across the world and it is likely that other countries will release them while the United States government “encourages the Federal Reserve to continue its research, development, and assessment efforts for a U.S. CBDC.”

The plodding pace of the world’s largest economy in cryptocurrency regulation is a stark contrast to those of other economies. China has already released a CBDC and is moving fast to include it in the economy. Meanwhile, the U.K. government established a ‘cryptoasset taskforce’ in 2018 to examine regulation of the asset class across major government agencies and the country’s Financial Conduct Authority (FCA) outlined guidance for cryptoassets in 2019. Meanwhile, the Securities and Exchange Commission (SEC) continues to blow hot and cold towards cryptocurrencies and is angling with legislators to bring them under its control.

To that extent, some say that today’s order could find hasten a resolution to that issue. Appearing on Coindesk TV, Kristin Smith, executive director of the Blockchain Association – an advocacy organization, suggested that the executive order could soften current SEC Gary Gensler’s hard stance towards crypto. “I look forward to collaborating with colleagues across the government to achieve important public policy goals: protecting investors & consumers, guarding against illicit activity, & helping ensure financial stability,” Gensler tweeted after the order was released.

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