From digital dollar to tackling illegal activity: Here’s what’s in Biden’s executive order on crypto

174

[ad_1]

US President Joe Biden, with Treasury Secretary Janet Yellen, speaks during a meeting with his cabinet at the White House in Washington, DC, on March 3, 2022.

Jim Watson | AFP | Getty Images

U.S. President Joe Biden is set to sign an executive order on Wednesday, calling on the government to examine the risks and benefits of cryptocurrencies.

It’s a long-awaited directive that has had the crypto industry on edge, not least due to growing regulatory concern around the world surrounding the nascent digital asset market.

There had been reports of a divide between White House officials and Treasury Secretary Janet Yellen leading to delays in the policy rollout.

The crypto market got wind of the executive order overnight after the Treasury accidentally put out a since-deleted statement calling it “historic” and releasing some of the details ahead of time.

Administration officials have now finally announced Biden will issue the order on Wednesday. It calls on federal agencies to take a unified approach to regulation and oversight of digital assets.

Here are the key things to know.

Protecting consumers

The measures announced Wednesday will focus on six key areas:

  • Consumer and investor protection
  • Financial stability
  • Illicit activity
  • U.S. competitiveness on a global stage
  • Financial inclusion
  • Responsible innovation

Protecting consumers is an important part of the directive. There have been countless stories of investors falling for crypto scams, or losing huge sums of money through cyberattacks on exchanges or users themselves.

The Biden administration is calling on the Treasury to assess and develop policy recommendations on crypto. It also wants regulators to “ensure sufficient oversight and safeguard against any systemic financial risks posed by digital assets.”

While policymakers have been keen to downplay any systemic risks resulting from crypto, there have been increasing concerns over the role played by stablecoins. These are digital tokens that are meant to be pegged to the value of existing currencies like the U.S. dollar.

Tether, the world’s largest stablecoin, has attracted the ire of regulators over claims that its token is not sufficiently backed by dollars held in reserve. Tether says its coin is fully-backed, however the make-up of its reserves includes short-term debt obligations like commercial paper, not just cash.

The topic of stablecoins was notably absent from the White House’s announcement Wednesday, though Yellen has made clear she wants to see Congress introducing regulation for the sector.

Illicit activity

Climate change

U.S. competitiveness

Part of the language in the White House announcement focuses on giving the U.S. a competitive edge over other countries when it comes to crypto development. This is especially significant now that China has essentially banned cryptocurrencies.

Biden has tasked the Department of Commerce with “establishing a framework to drive U.S.A competitiveness and leadership in, and leveraging of digital asset technologies.”

Digital dollar

‘Watershed moment’

Delivery of the new policy agenda removes a key source of uncertainty for an industry that has already been rocked by countless regulatory hiccups and scandals.

Earlier this year, crypto start-up BlockFi was hit with a record $50 million fine by the U.S. Securities and Exchange Commission over allegations it violated securities laws with its retail lending product. The penalty was part of a larger $100 million settlement which included payments to 32 states.

Coinbase has similarly run into trouble with the regulator, though it managed to avoid punishment. The SEC threatened Coinbase with legal action over a product similar to BlockFi’s which offered users interest payments on their crypto holdings. The company subsequently dropped plans for the service.

“This is a watershed moment for crypto, digital assets, and Web 3, akin to the 1996/1997 whole of government wakeup to the commercial internet,” Jeremy Allaire, CEO of crypto firm Circle, said on Twitter.

Crypto investors appeared to agree. Prices of bitcoin surged above $42,000 Wednesday on optimism over the U.S. legislative action.

[ad_2]

Source link