The Biden administration is tackling cryptocurrency and blockchain with a new executive order meant to promote future innovation in the industry while minimizing the financial risks to Americans and the global financial system.
The order, which President Joe Biden is expected to sign Wednesday, will hasten the research and possible creation of the Federal Reserve’s own digital currency, pushes for greater support for innovation in blockchain technology and works to ensure the new systems won’t increase inequality or financial swings.
Agencies like the Commerce, State and Treasury departments, as well as the Federal Reserve, have been working with or researching cryptocurrencies and blockchain technologies for years.
The latest executive order, developed in conversations with major industry players, is bringing in the entire administration to the effort.
The administration’s executive order is the most significant intervention the federal government has taken into cryptocurrency and blockchain technology so far.
The order instructs federal agencies to collaborate on digital assets in six areas: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
Per the order, the Treasury Department will come up with recommendations for consumer financial health and protection. It will also further research the future of payment systems, like cryptocurrency.
Other departments will determine the risks and benefits of cryptocurrency and blockchain, with reports to be delivered to Biden over the next six months.
The Commerce Department is tasked with ensuring that the U.S. financial system and the dollar remain central to global finance by understanding how to leverage digital assets in that goal.
“Our assessment of the risks and potential benefits of digital assets must include an understanding of how our financial system does and does not meet the current needs of consumers in a manner that is equitable, inclusive and efficient,” said a senior administration official who spoke on the condition of anonymity.
Current American payment systems are in many ways “antiquated” and can leave consumers with “options that are slow, costly or altogether inaccessible”, particularly for international transactions, the official said.
Yet many economists studying the space have expressed concern about the volatility of some cryptocurrencies, non-fungible tokens and other digital assets, as well as the threat that new financial technologies may allow for illicit conduct.
The administration denies that the rollout of the executive order is affected by the Russian invasion of Ukraine. Senior officials are also confident that cryptocurrencies can’t serve as an effective workaround for sanctions the U.S. and its allies have imposed on Russian elites and financial intuitions, especially the Russian Central Bank.
Russian banks and citizens have been rushing to transfer their assets into cryptocurrency as the ruble tumbles in value under severe Western sanctions meant to curtail the Kremlin’s war machine.
Countries around the world are taking divergent views on cryptocurrency and other so-called “Web3” technologies based on blockchain. The European Parliament will vote on March 14 whether to pass a comprehensive cryptocurrency bill that would add regulations across the continent but not ban the technology.