President Biden issued an executive order on Wednesday outlining a plan to regulate cryptocurrency. Biden’s crypto order was in the making for several weeks. But it’s unrelated to the Russia-Ukraine war and the economic sanctions the West imposed on Russia in recent days.
While some feared the executive order might harm bitcoin and the blockchain economy, the tone of the executive order is a lot more optimistic. The White House acknowledges the benefits of cryptocurrencies and the growing interest among US and global consumers to invest and use digital currency.
Moreover, the Biden administration says the US “must maintain technological leadership in this rapidly growing space,” and it “must play a leading role in international engagement and global governance of digital assets consistent with democratic values and US global competitiveness.”
It’s not the Russia-Ukraine war
The US sanctions against Russia were announced in the early days of the war. The European Union and other countries joined in with similar sanctions to impede Russia’s ability to finance its war efforts. Separately, many companies suspended operations in Russia. Many speculated that Russia would move to bitcoin and cryptocurrencies to avoid sanctions.
However, it soon became clearer that moving an entire economy to crypto was an impossible task. Moreover, exchanges like Coinbase and Binance announced they are complying with sanctions directed at Russian entities.
Biden’s crypto executive order being announced in the middle of a massive conflict between Russia and Ukraine might seem like it’s a part of a larger effort to contain the Russian threat. But reports dating back to late January have been saying the executive order was imminent.
Those reports said the Biden administration planned to kickstart a strategy for regulating bitcoin and cryptocurrencies at the federal level. That’s essentially what the order is doing.
What is Biden’s crypto executive order?
The White House describes Biden’s crypto executive order as “the first ever, whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology.”
The Biden administration acknowledges the massive growth of the crypto market, which ballooned to over $3 trillion in November 2021. The entire crypto market cap was at just over $14 billion five years before that. Moreover, the administration said that 16% of adult Americans have invested in, traded, or used cryptocurrencies.
The announcement also notes that over 100 countries are exploring or piloting Central Bank Digital Currencies (CBDCs). These are digital forms of money based on blockchain technology.
With that in mind, Biden’s crypto executive order “lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; US leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.”
The digital dollar
Biden’s crypto executive order also notes that the administration will explore a digital dollar “by placing urgency on research and development of a potential United States CBDC, should issuance be deemed in the national interest.”
US Secretary of the Treasury Janet L. Yellen also released a statement explaining what comes next from the government:
Under the executive order, Treasury will partner with interagency colleagues to produce a report on the future of money and payment systems. We’ll also convene the Financial Stability Oversight Council to evaluate the potential financial stability risks of digital assets and assess whether appropriate safeguards are in place. And, because the questions raised by digital assets often have important cross-border dimensions, we’ll work with our international partners to promote robust standards and a level playing field.
Bitcoin price reacts positively to Biden’s order
That’s to say, Biden’s cryptocurrency executive order will not have an immediate effect on how bitcoin and crypto works. You can still trade digital tokens as before and mine bitcoin and ethereum. Exchanges will continue to operate as usual. But the order indicates the government wants a more transparent, cohesive approach to regulating this nascent industry. And, rather than ban bitcoin or strangle development, the Biden administration is embracing it.
The market has reacted positively to Biden’s crypto executive order so far. Coinbase chief policy officer Faryar Shirzad’s statement on Twitter (above) is one such example.
More importantly, bitcoin rose by about 10% in trading on Wednesday morning, trading at around $42,500 at the time of this writing. As usual with the crypto market, all the other digital coins went up with bitcoin. The entire crypto market cap rose by around $143.43 billion (about 8.5%) to $1.816 trillion.