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U.S. President Joe Biden’s Cryptocurrency Executive Order shows an openness to consider the technology and acknowledges its benefits, which is positive for the development of the sector
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Lack of clarity and request for competing agencies to present further research later this year means that broader and more mainstream adoption of cryptocurrencies within a certain regulatory framework, could still be some time away
When then-U.S. Securities and Exchange Commission Chairman Jay Clayton had too faceoff initial coin offerings and other novel fund-raising mechanisms in 2017, his agency’s piecemeal approach towards regulating the emergent cryptocurrency sector left much to be desired.
An appointee of the Trump administration, cryptocurrencies were far down the list of priorities for Clayton, whereas the current SEC Chair Gary Gensler, was previously teaching a course on blockchain and cryptocurrencies at the MIT Sloan School of Management before his current appointment and has taken a far more proactive approach to a sector that is gaining scrutiny.
As Western sanctions were brought to bear on Russia, in the wake of that country’s invasion of Ukraine, many rushed to cryptocurrencies, both as a buffer against the precipitous fall in the value of the ruble, as well as to cling on to a means to send money out of the country.
The challenge facing many Russians now, with their banks being ejected from the SWIFT international banking messaging system, essential for cross border transactions, is that the Kremlin may decide to cease all dollar deposits or foreign currencies to stem capital flow.
For Washington and its allies, the prospect of cryptocurrencies being used to circumvent sanctions pressed forward the urgent need to regulate the sector.
U.S. President Joe Biden’s Executive Order on cryptocurrencies was therefore highly anticipated.
In a sector not known for regulatory certainty, it was hoped that the Biden administration would push forward plans for more comprehensive regulation that could help to grow the cryptocurrency industry and encourage broader participation.
While Biden’s executive order acknowledged the benefits of cryptocurrencies, which saw a rebound in Bitcoin and other digital tokens, the rally was short-lived as it became apparent that there was still plenty of work to be done.
Making matters worse, a regulatory turf war between the U.S. Securities and Exchange Commission and the Commodities and Futures Trading Commission is heating up, with companies and individuals looking for compliant ways to participate in the sector caught in the crossfire.
Far from settling the turf war, the Biden administration is instead calling for the sparring agencies to research various topics instead, the results of which will be due out later this year.
With midterm elections looming on the horizon and odds that the Republicans will win both the House and the Senate, it’s less clear how far Biden can get with his cryptocurrency legislative proposals.
There is bipartisan accord on the need for cryptocurrency regulation, but both Republicans and Democrats are divided on the extent of that regulation.
Yet investors can remain hopeful, buoyed by the swift bipartisan response to the Russian invasion of Ukraine, there is room to believe that lawmakers can work together if urgency requires.
And given that cryptocurrencies have the potential to circumvent sanctions, lawmakers may see the urgency to develop more comprehensive regulations to oversee the sector, which should bode well for long-term adoption.
