What Biden's executive order means for crypto

Want to know more about today's Supreme Court EPA ruling?

Crypto may be too big to fail. Biden’s executive order recognizes that.

President Joe Biden’s administration is diving headfirst into questions about how to regulate cryptocurrencies and integrate them with the existing financial system — signaling a new acceptance by the U.S. government that the technology is here to stay.


Hear more from Benjamin Powers about this story:


A hotly anticipated executive order Biden signed Wednesday even directs the Federal Reserve to urgently explore creating its own digital currency, while telling federal agencies to better quantify the financial and security risks crypto poses.

While largely symbolic, the policy has been greeted with enthusiasm — and relief — by the crypto industry. Rumors had been kicking around since last fall that the White House would impose onerous restrictions on the sector in the name of national security, given concerns about the use of cryptocurrency to evade international sanctions, launder money and fund criminal activity. Crypto markets bounced slightly Wednesday before declining again Thursday.

“The whole world has moved very quickly,” said Josh Lipsky, director of the Atlantic Council’s Geoeconomics Center and a former International Monetary Fund adviser. “It’s a different reality on the ground than it was when we had the Trump administration. The Biden administration recognizes that reality and tries to get ahead of it, as opposed to pretending that it’s not there.”

ADVERTISEMENT

Then-President Donald Trump publicly declared himself “not a fan of bitcoin or any other cryptocurrency” in 2019. Last year, he called bitcoin — the world’s most prominent and highly valued cryptocurrency — “a scam” that competed with the U.S. dollar.

Other countries have taken extensive measures against those who offer services related to cryptocurrencies. China, for its part, has banned cryptocurrency mining and banks and payment firms from offering cryptocurrency transaction services.

The cryptocurrency market surpassed $3 trillion in market cap last November, the White House said Wednesday — an astronomical increase from $14 billion five years ago.

Even that is likely an underestimate of the sector’s size and influence, said Thomas P. Vartanian, executive director of the recently launched Financial Technology and Cybersecurity Center, a nonprofit focused on the modernization of financial regulation. He put crypto’s impact close to $10 trillion, counting an additional $3 trillion of securities built on that crypto and another few trillion dollars leveraging the system.

Overall, the Biden order directs more than two dozen federal agencies to investigate aspects of cryptocurrency and to coordinate any actions they take as the U.S. figures out a way to both embrace and police the alternative financial system. A lack of coordination between government agencies to this point has created a patchwork of sometimes contradictory regulations.

ADVERTISEMENT

The executive order provision addressing a potential U.S. digital currency from the Federal Reserve adds the country to a list of more than 100 nations pursuing or piloting their own central bank digital currencies. China leads the pack; more than 140 million people have opened virtual wallets of the country’s digital yuan, and China has recorded more than $9.7 billion in transactions.

Vartanian said he’s wary of the idea of a U.S. government digital currency.

“We shouldn’t be considering central bank digital currency until we know that it can be issued absolutely securely,” he said. “And we don’t know that because any central bank digital currency will be the No. 1 hacked target on the face of the planet.”

He’s also skeptical that the Biden order truly changes the crypto landscape in the United States.

“If you look at the executive order, it does exactly what every single one of them does since 1996,” he said. “It delegates to 24 agencies that responsibility to produce about two dozen reports. And each and every one of them does the same exact thing. These reports are just littering the desert of cyberspace with little to no action being taken.”

ADVERTISEMENT

Kristin Smith, executive director of the Blockchain Association, said that the emphasis on figuring out how to keep the U.S. competitive in the crypto space surprised her. “Over time, I believe that we’re going to see adoption of more use cases,” she said. “The understanding and the education gap are going to be closed. We’re going to be to have a more educated policymaking community, educated voters, and the policy and political power in the crypto ecosystem is rising.”

But getting to that point will require the governments and industry to grapple with the dark side of cryptocurrency. Over $14 billion was lost to crypto crime and scams globally in 2021, or more than double the losses in 2020, according to a report from the blockchain analysis firm Chainalysis. However, the report also notes that criminal activity as a percentage of overall transactions during that period hit an all-time low.

Other concerns raised by lawmakers around the industry include the potential for cryptocurrency to be a boon to countries like Russia when it comes to evading sanctions, including those that the U.S. and numerous other countries have imposed in response to Russia’s invasion of Ukraine.

  • Benjamin Powers
    Benjamin Powers

    Technology Reporter

    Benjamin Powers is a technology reporter for Grid where he explores the interconnection of technology and privacy within major stories.