What is the Crypto executive order that Biden will address this week?
President Joe Biden is expected to issue an executive order this week that would direct government agencies to develop a strategy to regulate digital assets.
It was reported in January that the Biden administration was preparing an executive order to study cryptocurrencies with the aim of developing a government-wide framework to regulate digital assets. The executive order would also mandate government agencies investigate the possibility of launching a central bank digital currency (CBDC) issued by the US Federal Reserve.
The move comes as it is unlikely that Congress will put in place any legislation to standardize rules for crypto. The directive will not involve any immediate direct action but will task agencies to report back after they have investigated risks associated with crypto assets including their financial stability and impact on the environment.
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Fed-backed US digital currency
Biden’s order will reportedly commission a study into the creation of a CBDC according to Yahoo Finance by several agencies. They will be tasked with analyzing payment systems with an eye to performing a technical evaluation into the requirements to support such a system for a ‘digital dollar’.
The Fed has already begun asking for public comment on a paper it released on the pros and cons of establishing a CBDC. Central banks in several countries are in the early stages of experimenting with digital coins directly backed by the country's fiat currency. There is fear that these could challenge the dollar’s dominance if the US doesn’t have one in place.
The directive will call on the Office of Science and Technology policy to develop a comprehensive evaluation of digital distributed ledger technology within 180 days. The order will ask for a follow-up report on the technology’s environmental impact in 545 days.
Standardizing rules and regulations for crypto assets
Under the executive order the State Department, Treasury and Commerce Department, and USAID would create an international and interagency framework for engagement with countries in an international forum to standardize rules and improve the adoption of digital assets.
The impact that the growth in the digital asset industry could have on market competition will be another focus of the directive. This will be carried out by the FTC and Consumer Financial Protection Bureau, along with the Attorney General. Meanwhile, CFTC, SEC, Federal Reserve, FDOC and OCC within their respective jurisdictions will be ordered to prepare a report on market protection measures from cryptocurrency risks for businesses, consumers and investors.
Government taking steps to control the crypto market
Concerns over potential systemic risks posed by digital assets has spurred the President's Working Group on Financial Markets to call on the Financial Stability Oversight Council (FSOC) to look into those presented by stablecoins. Stablecoins are pegged to a reserve asset like a fiat currency or gold, but are issued privately and not by a central bank. There are worries about whether they are backed up with enough reserves, as in the case of the stablecoin tether. There are calls for them to only be issued by insured banks so that US regulators would have more jurisdiction over the industry.
The FBI recently set up a new "virtual asset exploitation" unit to fight crime using cryptocurrencies. The new unit will be tasked with blockchain analysis and virtual asset seizure. Eun Young Choi, an experienced computer crimes prosecutor, has been tapped to run the new unit.