Cryptocurrency and digital assets’ popularity has grown immensely over the last few years, leaving many world leaders scratching their heads on how they can best capitalise on this booming market, in large part due to the lack of regulation. In order to ensure they are used and developed responsibly, President Joe Biden has signed an executive order outlining the government’s approach to digital currencies.
Digital assets, including cryptocurrencies, have seen explosive growth in recent years, surpassing a $3trillion market cap last November and up from $14billion just five years prior. Surveys suggest that around 16 per cent of adult Americans – approximately 40 million people – have invested in, traded, or used cryptocurrencies.
As a result, President Biden signed an executive order outlining the whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology. The 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.
As pointed out by Shearman & Sterling, it should be made clear that the executive order does not prescribe a regulatory framework for cryptocurrencies and digital assets – something that has been a hot topic in the crypto sphere – but rather an issuance of rules and recommendations.
The executive order calls for measures to:
- Protect US consumers, investors, and businesses by directing the Department of the Treasury and other agency partners to assess and develop policy recommendations to address the implications of the growing digital asset sector and changes in financial markets for consumers, investors, businesses, and equitable economic growth. The Order also encourages regulators to ensure sufficient oversight and safeguard against any systemic financial risks posed by digital assets.
- Protect US and global financial stability and mitigate systemic risk by encouraging the Financial Stability Oversight Council to identify and mitigate economy-wide (i.e., systemic) financial risks posed by digital assets and to develop appropriate policy recommendations to address any regulatory gaps.
- Mitigate the illicit finance and national security risks posed by the illicit use of digital assets by directing an unprecedented focus of coordinated action across all relevant US Government agencies to mitigate these risks. It also directs agencies to work with our allies and partners to ensure international frameworks, capabilities, and partnerships are aligned and responsive to risks.
- Promote Equitable Access to Safe and Affordable Financial Services by affirming the critical need for safe, affordable, and accessible financial services as a US national interest that must inform our approach to digital asset innovation, including disparate impact risk. Such safe access is especially important for communities that have long had insufficient access to financial services. The Secretary of the Treasury, working with all relevant agencies, will produce a report on the future of money and payment systems, to include implications for economic growth, financial growth and inclusion, national security, and the extent to which technological innovation may influence that future.
- Support technological advances and ensure responsible development and use of digital assets by directing the US Government to take concrete steps to study and support technological advances in the responsible development, design, and implementation of digital asset systems while prioritising privacy, security, combating illicit exploitation, and reducing negative climate impacts.
- Explore a US Central Bank Digital Currency (CBDC) by placing urgency on research and development of a potential United States CBDC, should issuance be deemed in the national interest.
The Administration will continue work across agencies and with Congress to establish policies that guard against risks and guide responsible innovation, with our allies and partners to develop aligned international capabilities that respond to national security risks, and with the private sector to study and support technological advances in digital assets.
But what does this mean?
“Over the last 12-24 months, the cryptocurrency industry has become a mainstay in headlines across both trade and general media,” said David Benigson, CEO and co-founder of Signal AI. “ And this executive order has likely solidified the cryptocurrency space as one of the most talked about topics for the rest of 2022 – and likely beyond – among enthusiasts and skeptics alike.”
Signal AI also analysed the impact Joe Biden had on social media: he was able to generate significant positive media sentiment around the topic of cryptocurrency in the 24 hours following the executive order announcement. This positive sentiment was seen both narrowly in the financial and cryptocurrency trade media’s cryptocurrency coverage, as well as throughout the entire media landscape.
Biden sentiment across broad media sphere crypto coverage:
- 63 per cent Positive
- 30 per cent Neutral
- 7 per cent Negative
Biden sentiment in financial / Cryptocurrency trade media crypto coverage:
- 62 per cent Positive
- 36 per cent Neutral
- 2 per cent Negative
Luna Market‘s co-founder, Billy Huang, responded to the news by saying, “The recent executive order has shown the US government’s vision for approaching the crypto regulation framework. We believe this is cause for cautious optimism as the US shows no signs of banning it outright, and instead is approaching public policy frameworks to help shepherd crypto and blockchain tech into the economy as a whole.
“This is the first big step towards bringing crypto closer to mainstream audiences. As crypto and blockchain technologies become a vital part of how people transact, it is increasingly vital for people to trust the policies that govern them. The executive order itself is more of a signal that regulations are coming and crypto/blockchain is here to stay.
“The biggest barrier to governing blockchain technologies is the advancement of regulatory technologies themselves. The infrastructure for tracking payments and transactions is complex and will take time to fully test, build, and deploy across the industry. To this end, we believe we are still a ways off from full governance, and instead will probably see government agencies streamline their currently fragmented crypto frameworks, introduce them to the public, and then enforce those rulesets, in that order.
“How does this impact businesses in the industry? Many blockchain and crypto startups find themselves in places where regulations are vague and hard to apply to their existing businesses. Future regulations will hopefully make it easier for blockchain-based startups to be compliant and protect mainstream consumers, which should ultimately be the goal.”