Biden Preparing Executive Order on Cryptocurrencies

The Biden administration reportedly is preparing an executive order concerning cryptocurrencies, to be issued as early as sometime in February 2022. In preparation, various federal agencies are assessing the risks and opportunities posed by digital currencies, and senior administration officials have held a series of meetings on the matter, sources indicate.

The news about the executive order emerged a day after the Federal Reserve Board (FRB) released a discussion paper that explores the pros and cons of creating a central bank digital currency (CBDC) for the U.S., which seeks public comment through May 20, 2022. The White House apparently is looking to seize the initiative, taking a central role in setting U.S. government policy on cryptocurrencies.

Political Imperative

Federal agencies reportedly have been studying digital currencies and possible policy and regulatory responses to them for several years, but not in a concerted and coordinated fashion. Meanwhile, this fragmented effort and the attendant lack of clarity about the overall direction of U.S. policy has been a source of frustration to participants in the growing cryptocurrency market. Also, some observers are concerned that decisions by other major nations to issue CBDCs may threaten the dominance of the U.S. dollar in the global economy.

The Office of the Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) are among the regulatory bodies within the U.S. federal government that have issued guidance letters, released informal statements, or engaged the public in rule-making efforts regarding how the emerging crypto industry should comply with federal laws and regulations. However, these efforts have not been coordinated so far.

What the Executive Order May Contain

The executive order reportedly under development will address the economic, regulatory, and national security challenges posed by cryptocurrencies. It will also issue a call for various federal agencies to submit reports in the second half of 2022, sources indicate.

A key report is expected to come from the Financial Stability Oversight Council (FSOC), whose ongoing role is to monitor risks to the U.S. financial system. Another critical report is expected to examine the risks posed by the use of cryptocurrencies to facilitate various illegal activities.

Meanwhile, the executive order is expected to assign specific roles to a broad spectrum of federal departments and agencies in developing a comprehensive U.S. digital asset strategy. These departments and agencies range from, for example, the U.S. Department of State to the U.S. Department of Commerce (DOC). A key objective will be ensuring that the U.S. remains competitive amid the exploding growth of digital assets worldwide.

The executive order also is expected to comment on the possibility of issuing a U.S. CBDC. However, it probably will refrain from staking out a firm position while the Fed continues to study this matter. As noted above, the Fed's study paper released on Jan. 20, 2022, invites the public to submit comments through May 20, 2022. Processing and following up on these comments is likely to take several additional months, at the least.