The Biden administration unveiled its long-awaited executive order on cryptocurrency regulation today, but what does it mean for investors?
The new order instructs agencies to officially recognise and regulate digital assets in the US.
It also tasks the US government to review the technological infrastructure needed to roll out a central bank digital currency, or ‘digital dollar’.
The US is currently lagging behind China in this respect after Beijing showcased the use of its ‘digital yuan’ at this year’s Winter Olympics.
The “Executive Order on Ensuring Responsible Innovation in Digital Assets” was signed by President Joe Biden today.
But, what does this “whole government strategy on digital assets” mean for investors in the cryptocurrency space?
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There has been a rapid expansion of cryptocurrencies across the globe, with the latest update being Wednesday’s bitcoin (BTC-USD) legalisation in war-torn Ukraine.
In light of this, the US government’s executive order is a strong signal that the crypto-sector is not going to go away any time soon.
The executive order stresses the need to facilitate the responsible development of the cryptocurrency industry, whilst “combating illicit exploitation, and reducing negative climate impacts”.
An immediate reaction by many investors to the news that the Biden administration was about to issue a crypto executive order would have been panic and fear of a regulatory shutdown.
However, the details of the order convey an enthusiasm on the part of the US government to learn about the industry and make America a leader in its development.
In a statement released yesterday by US Secretary of the Treasury Janet Yellen said that “under the executive order the Treasury will partner with interagency colleagues to produce a report on the future of money and payment systems.”
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Analysts have studied the order and the statement by Yellen and suggested it has reduced fears among crypto investors that the Biden administration would take a hard stance on the evolving crypto sector.
This has helped boost the price of key cryptocurrencies today, with bitcoin (BTC) hiking to above $42,000.
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According to Rebecca Retting, general counsel for Aave, president Biden’s executive orderr represents a landmark moment for the web3 ecosystem. Speaking to Yahoo Finance she said: “The recognition by the United States government that web3 constitutes the next generation of the internet. This order signals a long-term commitment by the White House to support the industry and bring the US into a leadership position in this space.”
“The Web3 industry is committed to collaborating with and working responsibly with policymakers, agencies and regulators as they respond to the order’s research directives, to ensure that the US makes sound Web3 policy that is able to evolve with the ecosystem.”
It is historic that the order comes at the same time Web3 infrastructure is being leveraged to support Ukraine in its current crisis in myriad ways – a sign of the expansive promise of this technology and the ways it can enhance all aspects of our world.”
According to many leading proponents of cryptocurrency, such as MicroStrategy’s Michael Saylor, the US regulatory interest is welcomed.
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Saylor maintains that widespread adoption of cryptocurrencies such as bitcoin will only take place when the industry has “clear crypto regulations”.
Speaking to CNBC Saylor said: “Additional regulatory clarity from the Biden administration is going to benefit bitcoin and accelerated institutional adoption of that asset.”
The executive order raises lots of questions, such as will stablecoins be shut down with the development of a Federal Reserve issued ‘digital dollar’?
There are no specifics as yet as the order is the first step in a comprehensive study by the US government in cryptocurrencies, NFTs and decentralised finance.
The White House fact sheet claims that “surveys suggest that around 16% of adult Americans have invested in, traded, or used cryptocurrencies”, now the Biden administration wants to overhaul how the nascent industry is regulated.
With the new executive order, the Biden administration wishes to protect US consumers, investors, and businesses from “any systemic financial risks posed by digital assets”.
It also proposes a Financial Stability Oversight Council to bring some clarity and order to the rapidly developing cryptocurrency sector.
The White House document states a need to “identify and mitigate economy-wide financial risks posed by digital assets and to develop appropriate policy recommendations to address any regulatory gaps”.
The new order recognises the need for the US to “drive innovation and maintain competitiveness” in the sector.
The US Treasury Department has been tasked with producing a “future of money and payment systems” with a significant urgent development of a US central bank digital currency, CBDC.