Biden Signs Executive Order on Cryptocurrencies and Takes First Step Towards Regulation

U.S. President Joe Biden yesterday signed an executive order to ensure the responsible development of digital assets.

This executive order is the first approach by the U.S. government to regulate the cryptocurrency industry, aiming to address a multitude of issues within the crypto space, including consumer protection, illegal financing, financial inclusion, and responsible development.

– The increasing development and adoption of digital assets and related innovations, as well as inconsistent controls to defend against certain key risks, require the development and alignment of the U.S. government’s approach to digital assets. –  states the executive order.

It is crucial that the executive order itself does not introduce new regulations nor provide regulatory agencies with the administration’s stance on which regulations, specifically, should be adopted. Instead, the order calls on federal agencies, such as the Federal Trade Commission, SEC, and CFTC, to coordinate their efforts regarding the oversight of the crypto industry. It also calls on the Department of the Treasury to produce a report on the future of money and payment systems.

President Biden’s executive order on cryptocurrencies is divided into 10 sections: policy, objectives, coordination, central bank digital currencies, consumer protection, financial stability, measures to address illegal financing of digital assets, international cooperation, definition, and,  finally, general provisions. 

In the second section, objectives, the executive order establishes six key government objectives related to digital assets.

At the forefront is the need to protect consumers, investors, and businesses in the U.S.

– The unique and diverse features of digital assets can pose significant financial risks to consumers, investors, and businesses if appropriate protections are not established. – states the executive order, echoing similar warnings often given by SEC Chair Gary Gensler. 

The second risk pertains to the protection of the U.S. from the perspective of global financial instability, highlighting that the rapidly growing industry of digital asset trading platforms may not be subject to appropriate regulations or compliant with them.

Thirdly, the executive order points to the illegal financing and national security risks posed by the misuse of digital assets. 

Biden’s order lists several illegal financial risks associated with cryptocurrencies, including money laundering, cybercrime, ransomware, drugs, human trafficking, and terrorism financing.

Capping the six key objectives, the executive order commits the U.S. to strengthen its leadership in technology, promote access to safe and affordable financial services, and support responsible development.

In a prepared statement, Treasury Secretary Janet Yellen praised the government’s commitment to responsible development.

– Such an approach will support responsible innovations that could result in significant benefits for the nation, consumers, and businesses. – Yellen said in her statement.

Jeremy Allaire, CEO of Circle, the issuer of the USDC stablecoin, says that the White House’s decisions are encouraging as they utilize a whole-of-government approach to leverage the opportunity for oversight and mitigate inherent risks in responsible innovations. He states that Circle, which has pushed for such an approach, continues to hope that policymakers will emerge from the review process with a solid understanding of the opportunities that crypto presents.

Dave Grimaldi, head of government relations at the Blockchain Association, is also optimistic.

– We were afraid of a harsher order, and perhaps some tougher proclamations, but for the emerging industry, this is a reasonable step towards protection, law enforcement, and education – Grimaldi wrote on Twitter.

Jerry Brito, executive director of Coin Center, says that the order stands in “stark contrast” to recent hot attempts by politicians and media members regarding the dangers of cryptocurrencies, whether it be climate destruction or theoretically aiding Russia in evading sanctions.

– The executive order is just further confirmation that when serious officials soberly look at the crypto space, they recognize it as an innovation that the U.S. will want to encourage and lead while mitigating obvious risks  – Brito stated.

Senator Cynthia Lummis, a strong advocate for Bitcoin, adds that the order is unconvincing in the need for a central bank digital currency, but that she will carefully continue to follow the central bank’s work in  this area.

Others believe that the executive order could lead to some unintended consequences. Messari founder Ryan Selkis, pointing to what he sees as inequalities in regulated crypto markets, says that the order could give President Biden the opportunity to look at the failures of SEC Chair Gary Gensler in protecting investors, promoting fair crypto markets in the U.S., and fostering capital formation, the very goals set forth by the executive order.