President Joe Biden on Wednesday signed an executive order directing agencies across the federal government to coordinate efforts to gauge the benefits and risks posed by cryptocurrency ownership, and whether to create an American digital currency.
The new order is the administration’s broadest attempt yet to regulate a rapidly growing industry and protect consumers, investors and the American economy from pitfalls in a market Securities and Exchange Commissioner Gary Gensler compares to the “Wild West.”
Digital assets, including cryptocurrencies, have exploded in popularity in recent years and surpassed $3 trillion in value in November, according to a White House fact sheet. About 16% of American adults, or roughly 40 million people, have invested in, traded or used crypto, the administration said.
The White House added that the order will instruct various government agencies, including the Commerce and Treasury Departments, to coordinate the federal approach to regulating digital assets.
“We need a comprehensive, all-of-government framework to address the emerging risks and opportunities that digital assets pose,” Brian Deese, director of Biden’s National Economic Council, told CNBC Wednesday morning.
“The financial innovation and the technological innovation underlying this boom has a lot of potential benefit, but the risks and the costs are increasingly becoming apparent,” he added. “We need a 21st-century government structure to actually address this.”
Bitcoin, one of the globe’s most popular cryptocurrencies, saw its dollar value jump more than 9% on Wednesday to around $42,300, according to Coin Metrics.
Many regulators and oversight bodies, including the SEC, the Commodity Futures Trading Commission and the Financial Stability Oversight Council, have spent years trying to bootstrap existing legal frameworks to monitor the novel markets for bitcoin, Ethereum and thousands of other tokens and assets.
But investors and lawmakers alike say such half-measures are insufficient to oversee the advent of what’s becoming one of the world’s largest markets and position the U.S. as a leader in the space.
Cameron Winklevoss, president of crypto exchange Gemini Trust, wrote Wednesday that Biden’s executive order is a “watershed moment” for the industry.
“It paves the way for thoughtful national crypto regulation that will allow builders to build onshore and ensure that the US remains a leader in crypto,” he wrote.
“It is important for various agencies (federal and state!) and Congress to work closely together,” Winklevoss added. “The WH recognizes the importance of overarching public policy and national interest rising above narrow jurisdictional battles to best develop a coherent and cohesive framework.”
But Winklevoss isn’t alone in that thinking.
Clifford Cone, a partner at law firm Clifford Chance, said in an interview that agencies have been reluctant to act as enforcers without congressional say-so. Gathering various regulators, lawmakers and industry representatives in one room to develop a regulatory framework, he said, is an important step.
“This is an asset class that isn’t going away. It’s grown very big, and there are a lot of competing interests,” Cone said Wednesday morning. “Many of us have been wanting to see this development for years, because there’s such a dearth of guidance out there.”
“Yes, you can go to the SEC, and you can go to the CFTC. But the issue is that this asset class doesn’t fit neatly into any of our existing securities, or commodities, regulatory frameworks,” he continued. “So, there’s been a hesitation within the SEC and the CFTC to really move forward with responsible rules-based guidance.”
The attorney, who represented VanEck as the company sought SEC approval for a bitcoin fund last year, said that many on Wall Street are awaiting more input from Congress in 2022.
Hoping to fill the legislative void around digital assets is Sen. Cynthia Lummis.
The Wyoming Republican has for months been drafting what’s expected to be a massive bill that seeks to answer fundamental, but still-unanswered questions about how digital assets will be regulated in the U.S.
Though the text of the bill is not yet available, those familiar with the bill’s design say it could include guidance on what constitutes a digital “security” versus a “commodity,” introduce a new family of digital markets laws to govern assets and exchanges, and delineate powers to various federal regulators to enforce them.
“Currently, we just don’t have enough investor protection in crypto finance, issuance, trading, or lending,” SEC chief Gensler told lawmakers in September. “Frankly, at this time, it’s more like the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted.”
