On March 9, President Biden signed a first-of-a-kind Executive Order (and accompanying Fact Sheet) that immediately impacted cryptocurrency markets and gave American businesses and investors an indication of impending regulatory changes. The Order seeks to develop American monetary policy to address cryptocurrency’s recent but material impact on the world economy.
Cryptocurrency has been steadily growing in the United States, and 16% of Americans have invested in, traded, or used cryptocurrency.1 But digital currency isn’t just growing in the United States with “[o]ver 100 countries” exploring the use of cryptocurrency as their sovereign currency2 and El Salvador officially adopting Bitcoin as a legal tender.3 Because of these developments, the Biden Administration believes there is an opportunity to reinforce American leadership in the global financial system, but only by enacting new policy priorities.
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; and
- Responsible innovation.
Most of the directives in the Executive Order are to develop policy recommendations for later consideration. However, two notable directives are to continue the exploration of developing a U.S. Central Bank Digital Currency (CBDC) and to mitigate the risks related to cryptocurrency, including privacy, data protection, and cybersecurity.4
The Executive Order acknowledges consumer privacy risks and the need for safeguards to “shield against arbitrary or unlawful surveillance, which can contribute to human rights abuses.”5 In addition, another policy objective outlined in the Executive Order is to ensure that firms working with digital assets provide adequate protections for sensitive financial data.6 Finally, the cybersecurity issues at major digital asset exchanges and trading platforms must be tackled to avoid past issues that have “resulted in billions of dollars in losses.”7
These policy directives are unlikely to change federal regulatory obligations or enforcement in the immediate future. However, where agencies have discretion under the current regulatory scheme, businesses should be aware of the new national crypto policy directives.
For assistance with evaluating how this new Executive Order may impact your company, please contact Anthony Hendricks, Drew Palmer or another member of the firm’s Banking & Financial Institutions or Cybersecurity & Data Privacy Practice Groups.