Biden Orders Roadmap for Responsible Crypto Development
March 10, 2022
Bitcoin and other cryptocurrencies enjoyed an 8 percent jump in value Wednesday following President Joe Biden’s signing of a six-part executive order designed to protect U.S. consumers, investors and businesses, foster global financial stability and mitigate the national security risks presented by the illicit use of digital assets. The Executive Order also seeks to reinforce U.S. leadership in the global financial system, promote a more equitable financial system and encourage technological development and responsible use of digital assets. Perhaps most surprisingly, the order also prioritizes exploring a U.S. Central Bank Digital Currency (CBDC).
The result of such analysis may be to issue a United States CBDC, should it be “deemed in the national interest.” The challenge of centralizing a currency that by definition is decentralized appears formidable, and a lively regulatory debate can be expected to ensue.
The order “encourages the Federal Reserve to continue its research, development, and assessment efforts for a U.S. CBDC, including development of a plan for broader U.S. Government action in support of their work. This effort prioritizes U.S. participation in multi-country experimentation, and ensures U.S. leadership internationally to promote CBDC development that is consistent with U.S. priorities and democratic values,” says the administration’s accompanying fact sheet.
“Biden’s executive order attempts to address the lack of a framework for the development of cryptocurrencies in the U.S., which critics say could leave the country’s industry behind the rest of the world,” CNBC writes.
While Bitcoin began trading higher, at $42,118.73, at 6:00 a.m. ET on Wednesday, by 5:30 p.m. it began dropping, to about $39,300, according to CoinMarketCap.
“Other cryptocurrencies including ether were also sharply higher,” CNBC observed, concluding that “the executive order appears to be broadly welcomed by the cryptocurrency industry and investors.” When treasury secretary Janet Yellen issued a statement ahead of the order’s publication, Gemini cryptocurrency exchange co-founder Cameron Winklevoss, “called the executive order a ‘constructive approach to thoughtful crypto regulation,’” CNBC writes.
Meanwhile, in an article entitled “Reality Intrudes on a Utopian Crypto Vision,” The New York Times reports on American CryptoFed, “a new kind of company spawned by the advent of cryptocurrency — one that claims, in a way, not to be a company at all. There are no owners, officers or employees, according to its stated plan. Instead, American CryptoFed is a ‘decentralized autonomous organization’ [DAO] that is supposed to be steered automatically by computer code and governed by a community of users who vote on proposals with crypto tokens.”
DAOs are referred to as “a new model for commerce, one that could democratize business enterprises and break the hold that Big Tech and other entrenched middlemen have over innovation in the information age.” However, they could also “amount to Ponzi schemes intended to do little more than bolster the value of the digital tokens they sell,” prompting regulators to swoop in “amid concern about how to protect investors in organizations that do not adopt traditional business and accounting practices.”
In November, just four months after the launch of American CryptoFed, NYT reports that “the Securities and Exchange Commission effectively shut it down, saying the enterprise was ‘materially misleading’ the public with contradictory filings that failed to disclose key information such as audited financial statements.”
How a New Digital Dollar Could Shake the U.S. Financial System, Wired, 3/10/22
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