An executive order addressing the risks and benefits of cryptocurrency assets and related technologies underscores their present relevance within the world economy. The order seeks to develop American monetary policy to address cryptocurrency’s recent material impact around the globe.
President Biden signed the document on March 9, entitled “Executive Order on Ensuring Responsible Development of Digital Assets,” to establish the country’s position on matters of financial stability, national security and consumer protection.
American entrepreneurs and investors view the order as an indication of impending regulatory changes, a reflection of cryptocurrency’s growing popularity in foreign and domestic markets. The Pew Research Center reports 16% of Americans have invested in, traded or used cryptocurrency, with projections for additional growth. The executive order’s fact sheet characterizes cryptocurrency as having seen “explosive growth in recent years, surpassing a $3 trillion market cap last November and up from $14 billion just five years prior.”
More than 100 countries have considered using cryptocurrency as their sovereign national currency, the report states, and El Salvador made the decisive move to substitute colones as legal tender in September 2021. The Biden administration recognizes the opportunity to reinforce American leadership in the global financial system but not before enacting new policy priorities, governance and guardrails sure to provide underpinnings critical to formal standards.
The March 9 executive order identifies new U.S cryptocurrency policies across six key priorities:
- Consumer and investor protection.
- Financial stability.
- Illicit finance.
- U.S. leadership in the global financial system and economic competitiveness.
- Financial inclusion.
- Responsible innovation.
Policy recommendations for consideration are included as directives within the executive order to be addressed in light of anticipated broader adoption of cryptocurrency. Worth noting, however, are two items specifying continued exploration of developing a U.S. Central Bank Digital Currency and systemic mitigation of transactional risks inherent to cryptocurrency, including privacy, data protection and cybersecurity.
Consumer privacy risks and the need for safeguards to “shield against arbitrary or unlawful surveillance, which can contribute to human rights abuses” are also specifically outlined in the executive order. Furthermore, ensuring firms working with digital assets provide adequate protections for sensitive financial data is also detailed as a policy objective. Cybersecurity issues detected at major digital asset exchanges and within known trading platforms must be controlled to avoid past issues that have “resulted in billions of dollars in losses.”
Although the policy directives outlined in the executive order are unlikely to change federal regulatory obligations or enforcement in the immediate future, awareness of cryptocurrency’s potential impact is growing within the financial sector and the broader business community. Policy directives are to be expected, especially from agencies with regulatory discretion.
* This article first appeared in The Journal Record on April 1, 2022, and is reproduced with permission from the publisher.