President Biden is gearing up to issue an executive action to develop an initial government-wide strategy for digital assets within a matter of days that will put the White House at the central role in dealing with efforts to regulate the $2 trillion booming sector.
The proposed national security directive is expected to come within the first or second week of February and would task some federal agencies to study and analyze digital assets, including cryptocurrencies such as Bitcoin, Etherium, stablecoins, and non-fungible tokens (NFT), with the goal of developing a workable regulatory framework.
According to Bloomberg, who first reported the news, the late-stage draft of the executive order will detail federal agencies to offer recommendations on relevant areas — touching on areas from financial regulation, economic innovation, and national security challenges posed by cryptocurrencies. The White House wants to be the point person to set cohesive policies to regulate Bitcoin and cryptocurrencies as current rules and regulations are narrow or scattered across sectors and agencies.
The Biden administration has ramped up the U.S. government’s work around crypto in recent months following the high-profile ransomware attacks like the Colonial Pipeline episode that occurred last May. Since then, the Biden Administration has faced increased pressure to take the lead on the issue, saying the evolving digital currency lacks clarity on U.S. rules, while some fear “that an embrace by China and other nations of government-backed coins could threaten the dollar’s dominance.
Senior Biden Administration officials have met multiple times on plans and drafted the directive in the last few weeks. According to a White House official familiar with the plans, the initiative is “designed to look holistically at digital assets and develop a set of policies that give coherency to what the government is trying to do in this space.”
The White House National Security Council is set to play a heavy involvement since the administration has determined that cryptocurrencies have “economic implications for national security.” The directive would also carve out roles for other agencies, including the State Department, Treasury Department, National Economic Council, Commerce Department, and Council of Economic Advisers, who would also be involved in the initiative. The memorandum would instruct those agencies to coordinate their work on its findings of digital assets throughout the executive branch.
The administration also wants relevant agencies to examine crypto in other policy areas, including consumer protection, competition policy, research, and innovation, the official said. Those agencies involved in analyzing crypto will be given until the second half of 2022 to issue a report on their findings after looking into “the systemic risks of cryptocurrencies and their illicit uses of the virtual coins” and would also come up with proposals based on its findings.
Several federal agencies have taken a scatter-shot approach weighed in on digital currencies. Last month, the Federal Reserve released a report on a central-bank digital currency, or CBDC, laying out the pros and cons of digitizing the dollar. The Fed would begin working on creating the CBDC project once the “comment period” ends after May 20 and they get a firm position from the White House and Congress. Meanwhile, the Treasury Department released its own report on stablecoins in November, recommending that Congress act promptly to regulate the industry.
The White House aims to bring order to the haphazard approach that the government is now using to regulate crypto, the person said. Various federal agencies overseeing the industry, including the Securities and Exchange Commission (SEC), Office of the Comptroller of the Currency (OCC), and the Commodity Futures Trading Commission (CFTC), have issued guidance letters, informal statements, and public rulemaking efforts to direct how different aspects of the crypto industry should comply with federal law. However, there has been no consensus effort on the issue, especially regarding whether cryptocurrency should be registered as securities or how it can oversee exchanges, stablecoins, and high-yield lending products.
Financial regulators appointed by Biden have taken an increasingly hawkish tone about the booming crypto market that has ballooned to more than $2 trillion. They have also expressed concerns about the lack of regulatory rules and possible risks to financial stability.