Biden’s Crypto Executive Order Puts ‘Urgency’ On Digital Dollar Research And Fuels Bitcoin, Ether Prices

Topline

President Joe Biden on Wednesday unveiled a long-awaited executive order tasking federal agencies with researching cryptocurrencies and developing policy recommendations for the nascent market—a small, but crucial step in digital-currency adoption that helped major cryptocurrencies, including bitcoin and ether, pare recent losses.

President Joe Biden at the White House on Tuesday.

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Key Facts

In a statement Wednesday, Biden announced the first “whole-of-government” federal policy to “address the risks and harness the potential benefits” of cryptocurrencies by directing government agencies to take on a slew of measures around financial stability, illicit finance, financial inclusion and investor protection.

Perhaps the most anticipated measure, the order directs the U.S. government to “place urgency” on the research and development of a potential U.S. central bank digital currency, often referred to as simply a “digital dollar,” but it stops short of laying out a specific timeline for any pilot projects.

Though it doesn’t outline any new regulation, the order asks the Financial Stability Oversight Council to identify and mitigate any systemic financial risks posed by cryptocurrencies and to develop appropriate policy recommendations to address any regulatory gaps.

It also directs the Commerce Department to establish a framework to help government agencies incorporate digital-asset technologies into their policy, operational approaches and research and development.Major cryptocurrencies soared early Wednesday after a statement from Treasury Secretary Janet Yellen touting “responsible innovation” was seemingly posted online prematurely, with bitcoin and ether climbing 8% and 5%, respectively.

In emailed comments Wednesday morning, analyst Marcus Sotiriou of broker GlobalBlock said the “relatively benign” order helped give the cryptocurrency market “some clarity,” calling it a “positive indication of what’s to come for regulation in the U.S.,” after concerns about loftier crackdown measures dented investor sentiment in recent months.

Key Background

Booming institutional adoption lifted cryptocurrencies to meteoric highs last year, but the lack of centralized regulation has long been a concern for several top U.S. officials, and concerns over harsh government regulation have rocked the nascent market before. SEC Chairman Gary Gensler has repeatedly said cryptocurrencies deserve more government scrutiny, particularly because they can implicate securities, commodities and banking laws despite no regulation. Last year, he called on Congress to ramp up its authority over the cryptocurrency industry. “Right now, we just don’t have enough investor protection in crypto,” he said. “Frankly, at this time, it’s more like the Wild West.”

Big Number

$1.9 trillion. That’s the value of the world’s cryptocurrencies Wednesday morning, down roughly 36% from an all-time high above $3 trillion in November, but up a staggering 630% over the past two years.

Tangent

Though at least 86% of central banks around the world have actively explored the development of digital currencies, according to Bank of America, the Federal Reserve has remained cautious about its timeline for such a project, saying last summer that the central bank was “looking very carefully at the question of whether we could issue a digital dollar,” but adding: “We don’t need to be the first. We need to get it right.” The introduction of a digital dollar “would represent a highly significant innovation in American money,” Fed officials wrote in a January report. “Accordingly, broad consultation with the general public and key stakeholders is essential.” The Wednesday order “encourages” the Fed to continue its research and asks it to help support the U.S. government’s exploratory efforts.

What To Watch For

Under the executive order, the Treasury says it will partner with other agencies to produce a report on the future of money and payment systems.