- Biden administration allegedly looking to develop a more comprehensive framework to tackle and regulate cryptocurrencies
- Move by the White House would be welcome to avoid the piecemeal and inconsistent application of current regulations to cryptocurrencies
Given that the combined market cap of all cryptocurrencies at around US$2.3 trillion is barely a fraction of the total value of derivatives traded in a single day, estimated at around US$12 trillion, the amount of regulatory scrutiny that the sector attracts has been growing far out of proportion to its impact on the financial markets.
Nevertheless, that hasn’t stopped authorities from Beijing to the Biden administration from tightening the regulatory noose around the sector.
The White House is now weighing an executive order on cryptocurrencies as part of an effort to set up a government-wide approach to reign in the nascent asset class, according to Bloomberg sources.
Although the Biden administration has shown an appetite to regulate cryptocurrencies, the proposed directive would settle once and for all which federal agencies would have jurisdiction over which specific areas and offer recommendations on regulating the space.
The Biden administration initiative also aims to coordinate inter-agency cooperation to work on cryptocurrencies through the executive branch, including departments that had otherwise ignored the sector altogether.
The U.S. is the world’s number one cryptocurrency trading market and regulators are warning that the burgeoning market for digital assets, which is largely unregulated and lacks many basic investor protections, increasingly poses a systemic risk to financial stability.
U.S. national security agencies are also grappling with the high-profile use of cryptocurrencies in ransomware attacks and to fund terrorism.
The lack of clear operating theaters has also seen agencies jostle for jurisdiction over cryptocurrencies, with the most aggressive being the U.S. Securities and Exchange Commission, helmed by the crypto-savvy Gary Gensler.
A powerful lobby group has also built up in Washington, with the cryptocurrency industry stakeholders pushing back hard against increased regulation, which they argue will stymie innovation and kill jobs.
The Biden administration’s initiative could potentially put an end to the inter-agency wrangling, and would help clarify the responsibilities of various departments and task them with examining relevant topics to report back their findings.
If undertaken, the Biden administration’s push towards a more coordinated approach to regulating cryptocurrencies would be far more welcome than the piecemeal and seemingly arbitrary approach that has been taken so far.
Whether it’s done ultimately by executive order or through legislative enactment, the goal of the White House would be to adopt a unified approach towards cryptocurrencies.