WASHINGTON — President Biden on Wednesday signed an executive order on government oversight of cryptocurrency that urges the Federal Reserve to consider whether the central bank should step in and create its own digital currency.
Treasury Secretary Janet Yellen said the effort would “promote a fairer, more inclusive and more efficient financial system” while tackling illicit finance and preventing risks to financial stability and national security.
The Biden administration sees the explosive popularity of cryptocurrency as an opportunity to examine the risks and rewards of digital assets, said a senior administration official who previewed the order Tuesday on condition of anonymity. set by the White House.
Under the executive order, Biden also directed the Treasury Department and other federal agencies to study the impact of cryptocurrency on financial stability and national security.
Brian Deese and Jake Sullivan, Biden’s top economic and national security advisers respectively, said the order establishes the first comprehensive federal digital assets strategy for the United States.
“It will help position the United States to continue to play a leadership role in innovating and governing the digital asset ecosystem at home and abroad, in a way that protects consumers, is consistent with our democratic values and advances America’s global competitiveness,” Deese and Sullivan said in a joint statement Wednesday.
The action comes as lawmakers and administration officials increasingly express concern that Russia could use cryptocurrency to avoid the impact of sanctions imposed on its banks, oligarchs and government. oil industry due to the invasion of Ukraine.
Last week, Democratic Senses Elizabeth Warren, Mark Warner and Jack Reed asked the Treasury Department to provide information on how it intends to prevent the use of cryptocurrency to evade sanctions.
The Biden administration argued that Russia would not be able to compensate for the loss of US and European business by turning to cryptocurrency. Officials said the Democratic president’s order had been in the works for months before Russian Vladimir Putin invaded Ukraine last month.
Daleep Singh, Biden’s deputy national security and economic adviser, told CNN on Wednesday that “crypto is really not a workaround for our sanctions.”
The executive order had been widely anticipated by the financial industry, crypto traders, speculators, and lawmakers who compared the cryptocurrency market to the Wild West.
Despite the risks, the government said, surveys show that around 16% of American adults — or 40 million people — have invested in cryptocurrencies. And 43% of men aged 18-29 have invested their money in cryptocurrency.
Coinbase Global Inc., the largest cryptocurrency exchange in the United States, said the company has not seen a recent increase in sanctions-busting activity.
Yellen said last week that “many participants in cryptocurrency networks are subject to anti-money laundering sanctions” and that the industry is “not quite one where things can be dodged.” .
As for the Federal Reserve getting involved in digital assets, the central bank released a paper in January that said a digital currency would “best meet the needs” of the country via a model in which banks or securities firms payment create digital accounts or wallets.
Some digital currency participants welcome the idea of greater government involvement in crypto.
Adam Zarazinski, CEO of Inca Digital, a crypto data company that works for multiple federal agencies, said the order provides an opportunity to deliver “new approaches to finance.”
“The United States has an interest in developing financial innovation,” Zarazinksi said. He added that China and Russia are considering crypto and building their own currency. More than 100 countries have started or are piloting their own digital sovereign currencies, according to the White House.
Katherine Dowling, general counsel at Bitwise Asset Management, a cryptocurrency asset management firm, said an executive order that provides more legal clarity on government oversight would be “a long-term positive for crypto.” .
But Hilary Allen, professor of financial regulation at American University, cautioned against moving too fast to embrace cryptocurrencies.
“I think crypto is a place where we should be holding back on that innovation until it’s better understood,” she said. “As crypto becomes more integrated into our financial system, it creates vulnerabilities not just for those who invest in crypto, but for everyone who participates in our economy.”
On Tuesday, the Treasury Department said its financial literacy service would work to develop user-friendly materials to help people “make informed choices about digital assets.”
“History has shown that without adequate safeguards, private forms of currency can pose risks to consumers and the financial system,” said Nellie Liang, undersecretary for national finance.
Bitcoin and cryptocurrency-related stocks received a boost on Wednesday following Biden’s executive order.
Bitcoin price rose 9.8% to $42,211, according to Coindesk. Shares of cryptocurrency exchange Coinbase Global jumped 9.3% in midday trading, while online brokerage Robinhood Markets rose 4.5%.
Riot Blockchain, which focuses on cryptocurrency mining, jumped 11.5%. Digital payment platforms have also increased. PayPal added 4.9% and Block climbed 10.55%.