WASHINGTON — President Biden will sign an executive order on Wednesday that will direct the federal government to come up with a plan to regulate cryptocurrencies, acknowledging their popularity and potential to traditionally destabilize money and markets.
The order, which has been in development for months, would coordinate efforts by financial regulators to better understand the risks and opportunities of digital assets, particularly in the areas of consumer protection, national security and illicit financing.
The move, according to a fact sheet on the order released by the Biden administration, comes in response to “explosive growth” in digital assets, the growing number of countries exploring central bank digital currencies and the desire for US technology leadership. to keep. It directs financial regulators to continue the work that began in earnest last year, including studying and reporting on the creation of a digital dollar.
The final results could help set the contours of a rapidly innovating industry that has quickly become mainstream, but which critics say is facilitating illegal activity and posing significant financial risks to both consumers and the economy.
“The proliferation of digital assets creates an opportunity to strengthen U.S. leadership in the global financial system and at the technological frontier, but also has substantial implications for consumer protection, financial stability, national security and climate risk,” the White House said in a statement. . †
The decision sets out a national policy for digital assets in six areas: consumer and investor protection; financial stability; illegal financing; US leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
Cryptocurrency experts have long called on the government to streamline what was a distracted approach.
“We need clear answers about how we should do things,” said Louis Lehot, a cryptocurrency expert at the law firm of Foley & Lardner, in an interview. “We operate in a gray zone and in a sandbox. And time and time again someone gets in the sandbox and arrests someone, and that’s not the best way to grow a significant part of the economy.”
He added: “For years we have seen a complete lack of any strategic direction or thought from the federal government. For example, the industry still does not know what is a security and what is a utility token that is exempt from regulation. Those are things that would help us.”
The order comes amid concerns that Moscow will use cryptocurrency to circumvent sanctions issued by the US government over Russia’s invasion of Ukraine. A senior government official who detailed the contents of the order, but was not authorized to speak about it publicly, told reporters Tuesday evening that work on it predates the war in Ukraine. Cryptocurrency would not be a viable way for Russia to circumvent sanctions, the official said.
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But the geopolitical situation amplifies long-standing concerns about the role of anonymity in cryptocurrency and the risk of illegal activities arising from it. The blockchain technology underlying cryptocurrencies gives anyone who can read computer code the ability to track transactions, ostensibly eliminating the need for trust between transaction parties and enabling anonymity.
Names and personal identifiers are not always required to participate in the crypto economy – on many decentralized platforms, programs and apps, code runs the show. But as the crypto industry and its offerings explode and attract more and more money for projects that defy traditional business definitions, increasing amounts of digital assets are managed by major players – including venture capitalists and developers – who operate without sharing their names.
The extent to which regulators will try to change this will become clearer after they conduct the investigations and write the reports that will be guided by the mandate.
David Yaffe-Bellany reporting contributed.
