On Wednesday, the U.S. president signed a first-of-its-kind executive order on digital currencies that instructs federal agencies to coordinate their efforts
U.S. President Joe Biden directed federal agencies to coordinate their efforts at drafting cryptocurrency regulations in a first-of-its-kind executive order on Wednesday.
According to a fact sheet accompanying the order, a "whole-of-government" effort aims to regulate cryptocurrency—including consumer protection, financial stability, illicit uses, leadership in the global financial sector, financial inclusion, and responsible innovation.
In the first executive order specifically addressing the growing digital asset sector, the administration directs federal agencies to better communicate their initiatives in the sector, without laying out any specific positions the administration wants them to adopt.
Additionally, cryptocurrency companies will not be subject to any new regulations in the order.
As a senior administration official told reporters, cryptocurrency growth could pose a threat to the U.S. financial and security systems as well as business stability. Without “sufficient oversight,” criminals can use cryptocurrencies to launder funds or evade sanctions.
"Digital assets can, however, also foster American innovation and competitiveness, as well as promote financial inclusion," the official said. "Innovation is a key aspect of the American story and economy, generating opportunities for job creation, establishing and maintaining new industries, and sustaining our global competitive edge."
It was initially reported that Wednesday's executive order would define six "key priorities" for the administration: protecting U.S. interests, protecting global financial stability, preventing illicit uses, promoting "responsible innovation," financial inclusion, and U.S. leadership.
Approximately 40 million Americans, or 16% of the total U.S. population, reportedly invest in or trade in cryptocurrencies.
Crypto’s volatility was cited as one issue that could harm investors by an administration official, who pointed out that bitcoin’s (BTC) price at the beginning of the COVID-19 pandemic was around $10,300. The price peaked close to $70,000 in November before falling again in the fall of 2021 and the start of 2022.
Bitcoin’s price surged more than $3,000 (close to 8%) on Tuesday after a Treasury Department statement on the executive order was seemingly inadvertently published.
“The President has put forward a holistic whole-of-government approach to understanding not only the macroeconomic risks but also microeconomic, with the risk to each individual, investor, and business that engages with these assets,” the official said.
Investor protection is then a chief goal, the official said. Part of this effort will include understanding the technology underpinning digital assets. Another part will include understanding the weaknesses in the current financial system and which areas do not currently serve all consumers.
“(The order) recognizes that our assessment of the risks and potential benefits of digital assets must include an understanding of how our financial system does and does not meet the current needs of consumers in a manner that is equitable, inclusive and efficient,” the official said.
Consumers might face an “antiquated payment infrastructure,” which would be slow or unserviceable. The official said this was “especially true” of cross-border payments.
‘Future of money’
Part of the order directs the U.S. Treasury Department to draft a report on “the future of money and payment systems,” according to a fact sheet.
The interagency report will analyze cryptocurrencies’ impact on economic and financial growth, financial inclusion, national security and “the extent to which technological innovation may influence that future.” The report should also answer the earlier question of how the current financial system does or does not meet consumer needs.
In a statement originally published (and later removed) on Tuesday night, Treasury Secretary Janet Yellen said the report will complement the Treasury Department’s existing efforts to analyze the cryptocurrency sector.
In this, the order ties in to the Federal Reserve’s ongoing efforts to study digital dollar issuance. Branches of the central bank have published multiple reports in recent months evaluating both the policy and technological questions that must be answered before a central bank digital currency (CBDC) can be issued.
More than 100 countries are already looking into CBDCs, the administration official said, with use cases encompassing both domestic transactions as well as international usage.
“Many of these countries are also working together to set standards for CBDC design and cross-border systems,” the official said. “With implications for domestic and international priorities, including the centrality of the U.S. dollar in the global financial system, the [executive order] will help make sure we have a leadership role and a seat at the table.”