Unpacks President Bidens Crypto Executive Order

After a year of intense ups and downs in the crypto market, speculation in March 2022 intensified around an Executive Order from the White House that was supposedly imminent. President Biden signed the document on Wednesday, March 9, in what many saw as a potential watershed for the industry. However, legal change is a meticulous process, and months ahead 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 the perspective of regulatory compliance.

Crypto Executive Order: Why Now?

The first thing to acknowledge is that the March 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 answered. This was not surprising to many, because although he was expected to “lay out the administration’s game plan”, it was conversely not expected that President Biden would delve into any specific proposals.

The EO “encourages action” to meet a number of specific objectives, rather than determining what those actions should actually be. These goals include developing policy recommendations to protect U.S. consumers, investors and businesses, and exploring the potential for a digital currency from the US Federal Reserve (CBDC), among many others.

A constant throughout is that language is more exploratory than definitive; It seems that the administration is asking government departments to work 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 in authority in some quarters, with Fox stating that there are “many chefs in the kitchen”. It has also 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 should now guess their own behavior given that it is now under greater scrutiny, and that a line in the sand seems to have been drawn by administration.

What does the ruling say?

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

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

This commitment to “protection” is ubiquitous throughout the document, whether for consumers, businesses or investors. This 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 strictly regulated financial industry.

California love

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

“All too often, the government lags behind in technological progress, so we get ahead of it and lay the groundwork for consumers and businesses to thrive,” Newsom explained.

Although it does not appear to be an expression of support for the administration, such a gesture from a leading technology and economic giant such as the State of California certainly confirms the direction taken. There is a general feeling that it is a question of when, not whether, more states will follow the federal example.

An approval stamp

As explained, the executive order does not yet provide a conclusion on where it is heading from a regulatory perspective. However, it has set timelines for when various agency proposals must be submitted, the last of which is within 180 days after the EO was signed in March.

Now that 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 the problems can be alleviated. By encouraging consistency at the federal and state levels, it seems that a clear set of regulations is imminent across the board, especially if more states follow California’s example.

The best approach for crypto observers is to take into account the reports issued by government agencies, when and when they occur. Although it will not happen overnight, these reports will have a major impact on the establishment of consistent regulations. Judging by the long-standing reluctance to embrace crypto, and the language that permeates the document, it may well be a strict set of guidelines that have a lasting impact.