On Wednesday, President Joe Biden signed an executive order directing federal agencies to research the potential risks of cryptocurrencies, a plan to regulate them, and the possible creation of a U.S. digital currency.
The Biden administration worked with the cryptocurrency industry and other experts to prepare the executive order for several months.
Federal agencies will study cryptocurrencies and prepare a report with their findings, which the White House would consider before creating any new regulations.
According to a fact sheet from the White House, around 16% of adult Americans, roughly forty million people, have invested in, traded, or used cryptocurrencies. The popularity of cryptocurrencies, such as Bitcoin, has exploded in recent years. Last November, crypto surpassed $3 trillion in total market value, up from $14 billion five years ago.
“We must take strong steps to reduce the risks that digital assets could pose to consumers, investors, and business protections,” the White House said in a statement.
The order lays out a plan for federal agencies to focus their research on digital currencies across six areas: consumer and investor protection, financial stability, illicit finance, U.S. leadership in the global financial system and economic competitiveness, financial inclusion, and responsible innovation.
“The rise in digital assets creates an opportunity to reinforce American leadership in the global financial system and at the technological frontier, but also has substantial implications for consumer protection, financial stability, national security, and climate risk,” the White House said.
The order instructs federal agencies to examine how cryptocurrencies may impair U.S. laws and efforts to combat money laundering. Cryptocurrencies may have a higher risk of being used to launder money because names and personal identifying information are not always required to participate in the crypto economy.
The order comes as concerns arise that Russia may attempt to use cryptocurrencies to skirt the financial sanctions imposed against the country in response to its invasion of Ukraine.
Agencies are also to study how cryptocurrencies, some of which are acquired through large amounts of energy, impact the climate.
The executive order is also the first indication that the U.S. is considering a possible digital U.S. currency. Several countries, including China, have already adopted government-backed digital currencies. The Justice Department will research whether Congress should approve the creation of a digital currency.
Cryptocurrency experts had been calling for government intervention to streamline the broad and scattershot approach that has so far characterized the crypto industry.
“We need clear answers on how to do things,” Louis Lehot, a cryptocurrency expert at the law firm Foley & Lardner, told The New York Times. “We’re operating in a gray zone and in a sandbox.”
“We’ve seen a complete lack of any strategic direction or thought from the federal government for years,” Lehot added.
To what extent the federal government will attempt to regulate, or possibly streamline, the crypto industry will become more apparent once the federal agencies have completed their report.
