Biden’s Crypto Executive Order
Posted September 26, 2022
Is Biden coming for your crypto?
That’s what a lot of people think. But the truth seems far more tame.
Earlier this year, Biden created an executive order asking the government to look into crypto…
Mainly so they could understand what the heck was going on.
There were three parts to the order:
1.] Agencies must figure out the roles of each agency in regulating crypto
2.] The U.S. Department of State must come up with new rules, policies, and studies on crypto
3.] The Financial Stability Oversight Council must look into stablecoins
Six months on, they’ve released a framework for regulating crypto.
As always, the market freaks out because few people take the time to read these things. (I get why. They’re dense, complicated, and booooring.)
Without boring you to tears, here’s the nitty gritty…
The first thing the report pointed out was the amazing growth of crypto.
Last year, crypto hit a market cap of $3 trillion, sending clear signals that it’s becoming a force to be reckoned with.
The report also estimated that about 16% of Americans are invested in crypto. They expect that number to grow.
In anticipation, here are the six things they’re focusing on:
1.] Consumer and investor protections. One study in the report showed that 25% of all crypto projects were scams. (We actually think it’s more than that.) According to FBI stats, the amount of people who’ve lost money due to crypto scams jumped 600% in the year 2021. The White House wants to find ways to protect people from these scams. Sometimes, these regulations end up hurting innovation and helping incumbents. We’ll see.
2.] Financial stability. They want to integrate crypto into the traditional financial system without breaking anything. They point to Terra Luna, Three Arrows Capital, Voyager, and more as an example of things breaking. How do we prevent that from happening?
3.] Countering illicit finance. The White House points to ransomware, narcotics sales, money laundering as some of the things that crypto is used for in illicit finance. (By the way, this makes up a small fraction of crypto transactions because it’s much safer to use the US dollar.)
4.] Maintain U.S. leadership. The good news is the U.S. wants to remain the center of financial innovation and they see crypto as one way to do that.
5.] Financial inclusion. The report points out that roughly 7 million Americans don’t have bank accounts. Another 24 million Americans rely on slow and expensive services (checks and money orders.) This is where they think crypto could be helpful.
6.] Responsible innovation. They want to create a framework that incentivizes responsible innovation while cracking down on obvious scams.
To that end…
The government is asking the SEC, CFTC, the CFPB, and the FTC to take action against illegal activity. They can do this by working together and sharing data.
They’ve also asked the Financial Literacy Education Commission (FLEC) to educate Americans about the potential dangers of crypto.
Finally, they want the Federal Reserve to launch the FedNow system in 2023, which is an interbank clearinghouse. FedNow will use Real-Time Payments (RTP), the same system that Zelle uses.
Other considerations are DeFi, NFTs, fraud, climate, security risks, environment, and much more.
Overall, this means that crypto is here to stay. And the government knows it.
Problem is, how they plan to regulate it is still clear as mud. And they’re taking their sweet time.
But regulation is coming.
And the best time to get in isn’t when we have clarity. The best time to invest is in a period of uncertainty, long before the institutions.