The Biden Administration has had its share of issues with cryptocurrency regulations over the past year. Despite initial hopes that the administration would make progress, we haven't seen much from their end.
With 2022 presenting potential opportunity to get things right, the Biden cabinet is reportedly taking steps to bring clarity to the market.
A Fact-Finding Mission
In the final week of January, Barron's reported that the Biden White House is looking to issue an executive order on cryptocurrencies. Citing a source close to the White House, Barron's said the order would be issued in a national security memorandum.
The Barron's report said Biden's executive order would mandate several government agencies to study cryptocurrencies along with stablecoins and non-fungible tokens (NFTs). The objective is to develop a workable regulatory framework to allow cryptocurrencies to operate in the United States without constituting a national security threat.
The report isn't the first to hint at a possible executive order from Biden. Forbes reported that several government entities will be issuing data from research on the digital asset space sometime in mid-2022. The unnamed agencies are examining the risks and threats of illicit cryptocurrency use and methods for government risk mitigation.
Cryptocurrencies allow people to send money across borders, something the Biden Administration believes could pose a national security threat. The government is reportedly considering international regulatory collaborations with other countries since blockchain technology enables cryptocurrencies to work around geographical surveillance or rules.
An Explanation for ETF Failures
Experts are sharing opinions on what the executive order could mean for the industry. Eric Balchunas, a senior exchange-traded fund (ETF) analyst at Bloomberg, noted in a tweet that the White House's views on crypto could be responsible for the industry's delay in getting a spot Bitcoin ETF.
ETFs tracking the price of Bitcoin and other cryptocurrencies are a big hit, and American investors have been clamoring for such products for years. But, despite advances and applications of multiple companies, the Securities and Exchange Commission (SEC) has so far failed to approve any.
The agency finally greenlit ETFs tracking the values of Bitcoin futures last year, but pure-play spot Bitcoin ETFs are nowhere to be found. The government's concern around cryptocurrencies being a national security threat could explain why the SEC has failed to act on pure crypto ETFs.
Is America Ready to Compete?
In anticipation of the executive order, eyes are turning to Congress, where a bill could be concerning for the crypto market. This month, the House passed the America COMPETES Act - legislation designed to keep the economy going amid current supply chain issues.
The Act - initially proposed by Rep. Jim Himes (D-CT) - included a provision that would have offered more freedom for Treasury Secretary surveillance of financial institutions with suspected money laundering ties. Fortunately, lawmakers significantly modified the legislation's wording before the vote. The Act passed by a vote of 222-210 along party lines.
Before its modification, the AMERICA Competes Act received widespread condemnation across the market. Coin Center - a major cryptocurrency advocacy group - criticized the Act for giving the Treasury Secretary unilateral, unchecked power to ban financial institutions from engaging in cryptocurrency transactions.
The Act cited cryptocurrencies as useful in ransomware attacks on American companies. By delegating authority to the Treasury Secretary, the Act would have handed the Secretary unlimited powers to take action against any company in the crypto space.
Sharing his thoughts on the legislation, Rep. Ted Budd (R-NC) called it a "massive mistake" that would have significant ramifications over time. In a statement, Budd explained:
"The Treasury Department should not have unilateral authority to make sweeping economic decisions without providing full due process of rulemaking. This draconian provision would not help America compete with China, it would employ China's heavy-handed playbook to snuff out financial innovation in our own country."
Now that the Act has passed - minus the hostile crypto policies - all eyes are on the Biden White House's executive order and what it eventually brings to the market.