Unpacking President Biden’s Crypto Executive Order

After a year of intense ups and downs in the crypto market, speculation intensified in March 2022 around a White House Executive Order (EO) that was supposedly imminent. President Biden signed the document on Wednesday, March 9, in what many saw as a potential watershed for the industry. Breaking the law is, however, a thorough process, and months later there is still some uncertainty about the possible consequences of the order. This article will consider where the process is up to, and what it means from a compliance perspective.

Crypto Executive Order: Why Now?

The first thing to acknowledge is that March’s EO was by no means an exhaustive documentation of the rules and regulations that crypto firms must now follow. On the contrary, it contained more questions than it did answers. This was not surprising to many, because while he was expected to “lay out the administration’s game plan,” President Biden, conversely, was not expected to delve into any specific proposals.

The EO “calls for measures” to meet a number of specific objectives, rather than setting out what those measures should actually be. These goals include developing policy recommendations to protect American consumers, investors, and businesses, and examining the potential for a U.S. central bank digital currency (CBDC), among many others.

A constant throughout is that the language is more exploratory than definitive; It appears that the administration is asking government departments to put their heads together to develop the best possible solution for a relatively new, challenging proposal. While this may seem logical in many ways, it has been seen as disorganized and lacking authority in some quarters, with Fox stating that there are “a lot of cooks in the kitchen”. In addition, it has been accused of containing “little new information”.

What it has certainly done is to buy some time, to establish a greater level of control over firms that now have to second-guess their own behavior given that it is now under greater scrutiny and that a line in the sand appears to have been drawn by the administration .

What does the ruling say?

The document was essentially a mandate for a range of relevant organizations (from the Treasury Department to the SEC) to spend 90 days doing their due diligence, before sharing proposals on how each of its goals can be most effectively met. These goals are not only focused on regulatory compliance, they occupy a broader spectrum and demonstrate broader concerns around issues such as US leadership in the sphere as well as crypto’s inherent climate risk.

At this point, it would be speculative to predict what data will ultimately be captured by crypto firms to meet regulatory requirements. However, one of EO’s main focuses is to “promote equitable access to safe and affordable financial services”, and goes on to explain that “such safe access is particularly important for communities that have long had inadequate access to financial services”. This implies a recognition that digital assets are bound to affect more demographics than they are today – those with less experience and education around crypto, and who are more vulnerable to illegal activity.

This commitment to “protection” is omnipresent throughout the document, whether for consumers, businesses or investors. It suggests that communications from crypto firms (and by extension those involving NFTs) will be monitored to provide this layer of protection, perhaps even to the extent of the highly regulated financial industry.

California love

On May 4, California Governor Gavin Newsom signed his own cryptocurrency executive order, which was well aligned with President Biden’s and shared a sense of progressive ambition. As with Biden, California’s EO appears to be focused on establishing a transparent and level regulatory playing field, which in turn will protect consumers. It’s also more reactive than proactive, as Newsom encourages state agencies to collaborate and shape their frameworks. This is essentially a microcosm of President Biden’s approach across the country.

“Too often, government lags behind technological advances, so we’re getting ahead of it, laying the groundwork for consumers and businesses to thrive,” Newsom explained.

While not ostensibly proof of support for the administration, such a gesture from a leading technological and economic giant like the state of California certainly validates the direction taken. There is a general feeling that it is a matter of when, not if, more states will follow the federal example.

A stamp of approval

As explained, the announcement does not currently give any conclusion on where it is going from a regulatory perspective. However, it has set timelines for when various agency proposals must be submitted, the latest of which is within 180 days of the EO being signed in March.

Now that the EO has been signed, the crypto community has reason to be optimistic. The government has shown a willingness to embrace the benefits of crypto and invite constructive feedback on how to alleviate the problems. By encouraging consistency at the federal and state levels, a clear set of regulations seems imminent across the board, especially if more states follow California’s lead.

The best approach for crypto watchers is to pay attention to the reports released by government agencies, as and when they occur. Although it will not happen overnight, these reports will have a major impact on the establishment of a consistent regulatory framework. Judging by the longstanding reluctance to embrace crypto, and the language that permeates the document, it may well be a strict set of guidelines that has a lasting impact.

After a year of intense ups and downs in the crypto market, speculation intensified in March 2022 around a White House Executive Order (EO) that was supposedly imminent. President Biden signed the document on Wednesday, March 9, in what many saw as a potential watershed for the industry. Breaking the law is, however, a thorough process, and months later there is still some uncertainty about the possible consequences of the order. This article will consider where the process is up to, and what it means from a compliance perspective.

Crypto Executive Order: Why Now?

The first thing to acknowledge is that March’s EO was by no means an exhaustive documentation of the rules and regulations that crypto firms must now follow. On the contrary, it contained more questions than it did answers. This was not surprising to many, because while he was expected to “lay out the administration’s game plan,” President Biden, conversely, was not expected to delve into any specific proposals.

The EO “calls for measures” to meet a number of specific objectives, rather than setting out what those measures should actually be. These goals include developing policy recommendations to protect American consumers, investors, and businesses, and examining the potential for a U.S. central bank digital currency (CBDC), among many others.

A constant throughout is that the language is more exploratory than definitive; It appears that the administration is asking government departments to put their heads together to develop the best possible solution for a relatively new, challenging proposal. While this may seem logical in many ways, it has been seen as disorganized and lacking authority in some quarters, with Fox stating that there are “a lot of cooks in the kitchen”. In addition, it has been accused of containing “little new information”.

What it has certainly done is to buy some time, to establish a greater level of control over firms that now have to second-guess their own behavior given that it is now under greater scrutiny and that a line in the sand appears to have been drawn by the administration .

What does the ruling say?

The document was essentially a mandate for a range of relevant organizations (from the Treasury Department to the SEC) to spend 90 days doing their due diligence, before sharing proposals on how each of its goals can be most effectively met. These goals are not only focused on regulatory compliance, they occupy a broader spectrum and demonstrate broader concerns around issues such as US leadership in the sphere as well as crypto’s inherent climate risk.

At this point, it would be speculative to predict what data will ultimately be captured by crypto firms to meet regulatory requirements. However, one of EO’s main focuses is to “promote equitable access to safe and affordable financial services”, and goes on to explain that “such safe access is particularly important for communities that have long had inadequate access to financial services”. This implies a recognition that digital assets are bound to affect more demographics than they are today – those with less experience and education around crypto, and who are more vulnerable to illegal activity.

This commitment to “protection” is omnipresent throughout the document, whether for consumers, businesses or investors. It suggests that communications from crypto firms (and by extension those involving NFTs) will be monitored to provide this layer of protection, perhaps even to the extent of the highly regulated financial industry.

California love

On May 4, California Governor Gavin Newsom signed his own cryptocurrency executive order, which was well aligned with President Biden’s and shared a sense of progressive ambition. As with Biden, California’s EO appears to be focused on establishing a transparent and level regulatory playing field, which in turn will protect consumers. It’s also more reactive than proactive, as Newsom encourages state agencies to collaborate and shape their frameworks. This is essentially a microcosm of President Biden’s approach across the country.

“Too often, government lags behind technological advances, so we’re getting ahead of it, laying the groundwork for consumers and businesses to thrive,” Newsom explained.

While not ostensibly proof of support for the administration, such a gesture from a leading technological and economic giant like the state of California certainly validates the direction taken. There is a general feeling that it is a matter of when, not if, more states will follow the federal example.

A stamp of approval

As explained, the announcement does not currently give any conclusion on where it is going from a regulatory perspective. However, it has set timelines for when various agency proposals must be submitted, the latest of which is within 180 days of the EO being signed in March.

Now that the EO has been signed, the crypto community has reason to be optimistic. The government has shown a willingness to embrace the benefits of crypto and invite constructive feedback on how to alleviate the problems. By encouraging consistency at the federal and state levels, a clear set of regulations seems imminent across the board, especially if more states follow California’s lead.

The best approach for crypto watchers is to pay attention to the reports released by government agencies, as and when they occur. Although it will not happen overnight, these reports will have a major impact on the establishment of a consistent regulatory framework. Judging by the longstanding reluctance to embrace crypto, and the language that permeates the document, it may well be a strict set of guidelines that has a lasting impact.