On March 9, President Biden signed an executive order, Ensuring Responsible Development of Digital Assets, mobilizing the federal government to examine the risks and benefits of cryptocurrencies in a step toward regulating the industry. The order instructs federal agencies to work in tandem to address a myriad of issues such as the impact of cryptocurrencies on consumer protection, illicit finance, national security, and the U.S. economy while ensuring financial stability, innovation, and global competitiveness.
The executive order directs the Federal Reserve to research and explore the possibility of developing its own digital currency and an assessment of whether legislative action from Congress would be necessary for implementation. The order tasks the U.S. Treasury Department with developing guidelines for Americans to avoid fraud and volatility in the market. On March 8, in preparation of the executive order, the U.S. Treasury Department launched a financial literacy initiative to inform the public about the potential risks and benefits of investing in cryptocurrencies. They will also continue to examine the role of digital assets and blockchain technology in future payment systems.
The executive order comes as the global cryptocurrency market capitalization surpassed $3 trillion in 2021 and utility from numerous digital currencies have become more prevalent as many U.S. companies are accepting digital currencies as a form of payment and more Americans are investing. The President expects a report on all findings and recommendations, in consultation with his Cabinet, from federal agencies within 6 months of the executive order.
The possibility of federal action on cryptocurrencies has been in discussion since last October as industry leaders have braced for regulatory crackdowns amid many recent enforcement actions by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) on various cryptocurrency companies and platforms. Key figures in the cryptocurrency industry believe that the executive order is constructive in taking an “all-hands”, innovative approach in building a roadmap to responsible cryptocurrency integration into the U.S. financial system.
Buchanan Ingersoll & Rooney’s legal and government relations teams are well versed in the issues of cryptocurrency and delivering messages to government agencies regarding the benefits and concerns of clients impacted by the orders reviewed in this advisory.