President Joe Biden signed an executive order on government regulation of cryptocurrency on Wednesday. He urged the Federal Reserve to look into the possibility of creating its digital currency.
The endeavor, according to Treasury Secretary Janet Yellen, would “promote a fairer, more inclusive, and more efficient financial system”. It will simultaneously combat illicit money and mitigating threats to financial stability and national security.
As per a senior administration official who previewed the order Tuesday on the condition of anonymity, the Biden administration sees the rising popularity of cryptocurrency as a chance to investigate the risks and benefits of digital assets.
Biden also asked the Treasury Department and other federal agencies to explore the impact of cryptocurrency on financial stability and national security as part of the executive order.
Biden’s executive order
The order outlines the first comprehensive federal digital assets plan for the United States, as per Biden’s senior economic and national security advisers, Brian Deese and Jake Sullivan.
“That 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 protects consumers, is consistent with our democratic values and advances U.S. global competitiveness,” Deese and Sullivan said in a joint statement released on Wednesday.
The move comes as lawmakers and administration officials worry that Russia is using cryptocurrencies to dodge sanctions. The sanctions are placed on Russian banks, oligarchs, and the oil industry as a result of the invasion of Ukraine.
Senators Elizabeth Warren, Mark Warner, and Jack Reed, all Democrats, requested the Treasury Department last week for details on how it plans to prevent cryptocurrency from being used to evade sanctions.
Russia won’t be able to compensate for the US, European business loss by resorting to cryptocurrencies, says the Biden administration. Officials say the Democratic president’s order had been in the works for months before Russia invaded Ukraine last month.
Growing financial innovation
Biden’s deputy national security and economic adviser, Daleep Singh, told CNN on Wednesday that “crypto’s really not a workaround for our sanctions.”
The finance industry, crypto traders, speculators, and lawmakers have compared the cryptocurrency market to the Wild West. Therefore, they were all looking forward to the executive order.
Despite the hazards, polls reveal that around 16 percent of adult Americans — or 40 million people — have invested in cryptocurrencies. Furthermore, 43% of men between the ages of 18 and 29 have invested in cryptocurrency.
The largest bitcoin exchange in the US IS Coinbase Global Inc. It said it has not witnessed a recent spike in sanctions evasion activities.
“Many participants in the cryptocurrency networks are subject to anti-money laundering sanctions,” Treasury Secretary Janet Yellen said last week. Yellen also added that the market isn’t “completely one where things can be evaded.”
In January, the Federal Reserve issued a report stating that a digital currency “would best serve the needs” of the country if created through a scheme in which banks or payment corporations create accounts or digital wallets.
Some digital currency users are excited about the prospect of increasing government participation in the industry.
Adam Zarazinski is the CEO of Inca Digital, a crypto data firm that works with multiple federal organizations. According to him, the order allows delivering “new approaches to finance.”
“The U.S. has an interest in growing financial innovation,” Zarazinksi explained. He went on to say that China and Russia were looking at cryptocurrencies and developing their own currencies. More than a hundred countries have started or are developing their own digital sovereign currency, according to the White House.
Opinions and clashes
An executive order that gives more legal clarity on government regulation would be “a long term positive for crypto”, according to Katherine Dowling. She is a general counsel for Bitwise Asset Management, a cryptocurrency asset management firm.
However, Hilary Allen, a financial regulation expert at American University, warned against adopting cryptocurrency too quickly.
“I think crypto is a place where we should be putting the brakes on this innovation until it’s better understood,” she said. “As crypto becomes more integrated into our financial system it creates vulnerabilities not just to those who are investing in crypto but for everybody who participates in our economy.”
The Treasury Department’s financial literacy arm announced on Tuesday that it would endeavor to create consumer-friendly materials. It is to assist consumers “make informed choices about digital assets.”
“History has shown that, without adequate safeguards, forms of private money have the potential to pose risks to consumers and the financial system,” said Nellie Liang. Liang is an undersecretary for domestic finance.
Following Biden’s executive order, bitcoin and cryptocurrency-related stocks rose on Wednesday.
According to Coindesk, the price of Bitcoin was up 9.8% at $42,211. In noon trading, shares of bitcoin exchange Coinbase Global jumped 9.3%, while online stockbroker Robinhood Markets rose 4.5 percent.
Riot Blockchain, a cryptocurrency mining company, increased by 11.5 percent. The number of digital payment platforms has also increased. PayPal increased by 4.9 percent, whereas Block increased by 10.55 percent.