Just as the federal legalization of gambling has changed the financial landscape in the United States by allowing legal sportsbooks and Online Casinos, the use and popularity of cryptocurrencies have equally changed the way consumers conduct financial transactions and make investments throughout the country.
In preparation for federal regulation of cryptocurrencies, President Joe Biden signed an executive order directing the government to develop a strategy to regulate digital currency. However, it is unlikely that Congress will pass any legislation to regulate cryptocurrency. Therefore, the order won’t require immediate action except to ask agencies to report findings after investigating any risks associated with crypto assets and their impact and stability.
The move will also require government agencies to investigate the possibility of creating a central bank digital currency (CBDC) issued by the Federal Reserve. With the central banks of various countries just starting to look at creating digital coins backed by their flat currency, the government wants to make sure these won’t challenge the dollar’s strength if there’s not one in place in the U.S.
A digital version of the U.S. dollar could help validate crypto technology, and some think it could pose a long-term threat to private cryptos such as Bitcoin and Ethereum. On the other hand, a digital dollar would be backed by the government.
There were no new rules or additional requirements for the crypto industry, a multi trillion-dollar trade with many passionate investors. The deadlines for the variation of reports, assessments and consultations being completed range from 90 days to a year.
Crypto Sector Embraces Move
Members of the crypto community liked what they saw overall. However, they have worried that the administration did not like cryptocurrencies and may be tempted to take decisive actions against them to keep Russia from using blockchains to sidestep sanctions imposed after it invaded Ukraine.
Many experts think the Executive Order is a very positive development for the crypto industry. The government now acknowledges it needs to embrace the crypto sector by showing an open-minded approach for the government to work with all interested parties in the industry. It also puts an end to the notion that the U.S. government is interested in banning cryptocurrency and other digital assets.
National Security Concerns
There has also been a new unit set up by the FBI recently called the “Virtual Asset Exploitation Unit,” whose focus is to fight crypto crime. The new unit will conduct blockchain analysis investigations and deal with seizures of illegal virtual assets.
Until laws are put into place, crypto companies will be subject to regulation by enforcement. For example, last month, a crypto company in New Jersey called BlockFi settled with the SEC and 32 U.S. states by paying them $100 million. It was accused of offering promised annual yields above what is available on bank savings accounts without registering them with the SEC as securities.
As with other technology, digital assets are used in criminal activities such as money laundering and drug trafficking. There is evidence that China has played a role in manipulating the price of cryptocurrencies, and North Korea steals digital currency to help fund its nuclear programs.
Although the Biden administration still has many concerns about cryptocurrencies, he asks government agencies to research the implications of crypto specifically for national security, money laundering, consumer protection, financial stability, privacy, and energy usage.
This is a unique opportunity for the U.S. to instill the core values of liberty and freedom into what is becoming the world’s new financial system. By taking no action at this critical time, the government will be catering to the powers like Russia and China, who are already integrating digital assets into their economies.
No one knows how long it will take before the official U.S. crypto policy is developed. If any new laws are required to be passed, it would then involve Congress, which would slow the process even further.