Time to hang up your spurs, unregulated crypto. There’s a new sheriff in town.
After working with 30 countries last year to curb unlawful activity involving cryptocurrency—a market that many, including U.S. regulators, have compared to the Wild West—President Biden is now directing the departments of Treasury and Commerce to protect U.S. consumers, investors, and businesses from financial predators and maintain U.S. technological and economic leadership in the digital asset ecosystem.
The president issued an executive order to address the macro- and microeconomic risks associated with the growing popularity of digital assets, citing the sector’s shattering of a $3 trillion digital asset market cap last November—a surge from $14 billion just five years prior—and surveys indicating that roughly 40 million American adults have already “invested in, traded, or used cryptocurrencies.”
The order represents the first ever “whole-of-government” approach to regulate digital assets and sets out a national policy across six main areas: consumer and investor protection, financial stability, illicit finance, U.S. financial leadership and economic competitiveness, financial inclusion, and responsible innovation.
In addition to its key areas to protect involved entities, mitigate risk, and capture the possible benefits of cryptocurrencies, stablecoins, and other advances in distributed-ledger technologies, the order provides national leadership on expanding access to financial services—particularly to “underserved communities” within the traditional banking system—and assessing the impacts of such technologies on climate change.
The order also provides national leadership on considering the need for a U.S. Central Bank Digital Currency (CBDC) to produce a digital form of the country’s currency, something that over 100 countries are reviewing or testing, according to a senior administration official.
Given this evolution of the global financial system, the directive comes amid concerns from lawmakers and administration officials that Russia may be using cryptocurrency to evade sanctions over their invasion of Ukraine.
Earlier this month, the Financial Crimes Enforcement Network (FinCEN) alerted all financial institutions to be “vigilant” against Russian evasion efforts. And just last week, European Central Bank (ECB) President Christine Lagarde warned about such efforts, saying that she believes Russia is “certainly” using crypto assets to evade sanctions via ruble-to-stablecoin conversion, as reported by Bloomberg.
Because of the timeliness of the directive, Democrat and Republican lawmakers alike have praised the regulation effort.
U.S. Senate Banking Committee Ranking Member Pat Toomey (R-PA) said he was “encouraged” by the administration’s acknowledgement of the sector’s potential to promote technological innovation, while Sen. Sherrod Brown (D-OH) applauded the effort, saying that President Biden is “right to take a whole-of-government approach to addressing cryptocurrencies and considering a central bank digital currency.”
“It’s imperative we strengthen our financial resilience and national security right now,” said Brown, who serves as chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. “That includes protecting Americans from the risks of crypto to our economy and ensuring crypto can’t be used to skirt the law.”