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Joe Biden signs order on cryptocurrency as its use explodes in U.S.

President Joe Biden has signed an executive order on government oversight of cryptocurrency that urges the Federal Reserve to explore whether the central bank should create its own digital currency

March 09, 2022 07:43 pm | Updated 07:44 pm IST - WASHINGTON:

United States President Joe Biden also has directed the U.S. Treasury Department and other Federal agencies to study the impact of cryptocurrency on financial stability and national security. File

United States President Joe Biden also has directed the U.S. Treasury Department and other Federal agencies to study the impact of cryptocurrency on financial stability and national security. File | Photo Credit: AP

United States (U.S.) President Joe Biden on Wednesday signed an executive order on government oversight of cryptocurrency that urges the Federal Reserve to explore whether the central bank should jump in and create its own digital currency.

The Biden administration views the explosive popularity of cryptocurrency as an opportunity to examine the risks and benefits of digital assets, said a senior administration official who previewed the order on Tuesday on the condition of anonymity, terms set by the White House.

Under the executive order, Mr. Biden also has directed the U.S. Treasury Department and other Federal agencies to study the impact of cryptocurrency on financial stability and national security.

Brian Deese and Jake Sullivan, Mr. Biden's top economic and national security advisers, respectively, said the order establishes the first comprehensive Federal digital assets strategy for the United States.

"That will help position the U.S. to keep playing a leading role in the innovation and governance of the digital assets ecosystem at home and abroad, in a way that protects consumers, is consistent with our democratic values and advances U.S. global competitiveness," Mr. Deese and Mr. Sullivan said on Wednesday in a joint statement.

The action comes as lawmakers and administration officials are increasingly voicing concern that Russia may be using cryptocurrency to avoid the impact of sanctions imposed on its banks, oligarchs and oil industry due to the invasion of Ukraine.

Last week, Democratic Senators. Elizabeth Warren, Mark Warner, and Jack Reed asked the Treasury Department to provide information on how it intends to inhibit cryptocurrency use for sanctions evasion.

The Biden administration has argued that Russia won’t be able to make up for the loss of U.S. and European business by turning to cryptocurrency. Officials said the Democratic President's order had been in the works for months before Russia's Vladimir Putin invaded Ukraine last month.

Daleep Singh, a deputy national security and economic adviser to Mr. Biden, told CNN on Wednesday that “crypto’s really not a workaround for our sanctions.”

The executive order had been widely anticipated by the finance industry, crypto traders, speculators and lawmakers who have compared the cryptocurrency market to the Wild West.

Despite the risks, the U.S. Government said, surveys show that roughly 16% of adult Americans — or 40 million people — have invested in cryptocurrencies. And 43% of men age 18-29 have put their money into cryptocurrency.

Coinbase Global Inc., the largest cryptocurrency exchange in the United States, said the company had not seen a recent surge in sanctions evasion activity.

Treasury Secretary Janet Yellen said last week that “many participants in the cryptocurrency networks are subjected to anti-money laundering sanctions” and that the industry is not "completely one where things can be evaded.”

As for the Federal Reserve getting involved with digital assets, the central bank issued a paper in January that said a digital currency “would best serve the needs” of the country through a model in which banks or payment firms create accounts or digital wallets.

Some participants in digital currency welcome the idea of more government involvement with crypto.

Adam Zarazinski, CEO of Inca Digital, a crypto data company that does work for several federal agencies, said the order presents the opportunity to provide “new approaches to finance.”

“The U.S. has an interest in growing financial innovation," Mr. Zarazinksi said. He added that China and Russia were looking at crypto and building their own currency. More than 100 countries have begun or are piloting their own digital sovereign currency, according to the White House.

Katherine Dowling, general counsel for 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, a financial regulation professor at American University, cautioned against moving too fast to embrace cryptocurrencies.

“I think crypto is a place where we should be putting the brakes on this innovation until it’s better understood,” she said. “As crypto becomes more integrated into our financial system it creates vulnerabilities not just to those who are investing in crypto but for everybody who participates in our economy.”

On Tuesday, the Treasury Department said its financial literacy arm would work to develop consumer-friendly materials to help people "make informed choices about digital assets.”

“History has shown that, without adequate safeguards, forms of private money have the potential to pose risks to consumers and the financial system,” said Nellie Liang, undersecretary for domestic finance.

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