President Biden to order sweeping cryptocurrency review, setting stage for regulation

WASHINGTON — President Joe Biden signed an executive order Wednesday for a sweeping review of the government’s approach to cryptocurrencies, aiming to secure the nation’s position as a leader in the rapidly growing industry while containing risks to consumers and the financial system itself.

Ultimately, some structure could be imposed on what has been a fractured regulatory response to the rise of digital assets in a global market now valued at roughly $1.85 trillion.

“Fundamentally, an American approach to digital assets is one that encourages innovation but mitigates the risks to consumers, investors, and businesses, broader financial stability, and the environment,” National Economic Council Director Brian Deese and national security adviser Jake Sullivan said in a statement.

They said the work that Biden is ordering will “reinforce U.S. leadership in the global financial system and safeguard the long-term efficacy of critical national security tools like sanctions and anti-money laundering frameworks.”

The Russian invasion of Ukraine has sharpened Washington’s focus on both the promise and peril of digital currency. The Ukrainian government and affiliated causes have collected tens of millions of dollars in cryptocurrency donations since the conflict began. Meanwhile, some U.S. policymakers have raised concerns about the potential for Russians to use cryptocurrencies to dodge sanctions, although others say the relatively small size of the asset market and the traceability of digital tokens make it an unworkable option for the Russians targeted with sanctions.

The order calls for an “unprecedented focus of coordinated action across all relevant U.S. Government agencies” to mitigate the opportunities crypto presents for illicit financial transactions that could pose national security risks, according to a White House fact sheet.

The order also directs federal policymakers to place “urgency on research and development” of a central bank digital currency, a sort of digital dollar that more than 100 other countries including Russia and China are exploring for their own currencies. The Federal Reserve issued a report in January outlining potential benefits and drawbacks of issuing electronic cash, requesting public input on the matter. And the Federal Reserve Bank of Boston last month unveiled a technical mock-up for the project.

Biden’s order directs financial regulators to review any threats cryptocurrency poses to the stability of the financial system and the broader economy and develop recommendations to address them. It calls on the Commerce Department to work across the government to ensure that emerging policies protect U.S. leadership in the sector. And it orders the Treasury Department to report on the “future of money and payment systems,” with an eye toward promoting wider access to the financial system.

“As we take on this important work, we’ll be guided by consumer and investor protection groups, market participants, and other leading experts,” Treasury Secretary Janet L. Yellen said in a statement. “Treasury will work to promote a fairer, more inclusive, and more efficient financial system, while building on our ongoing work to counter illicit finance, and prevent risks to financial stability and national security.”

Industry leaders are greeting the White House order as a win for the sector. “Today, as democracies confront the greatest threat to global order in this century, we had a breakthrough,” Tomicah Tillemann, a former State Department official who recently joined an as-yet-unnamed venture capital firm investing in blockchain-based companies, wrote in a Medium post. “The Executive Order will inaugurate a serious, sustained discussion about how to build the policy architecture of a better internet. This is a debate Americans deserve.”

Circle chief executive Jeremy Allaire, whose company issues the world’s second-most-popular stablecoin, wrote on Twitter that the order signals that the United States “seems to be taking on the reality that digital assets represent one of the most significant technologies and infrastructures for the 21st century; it’s rewarding to see this from the WH after so many of us have been making the case for 9+ years.”