Four departments — Treasury, State, Justice and Commerce — will be asked to produce a report that sets out recommendations for how digital assets should be treated by the government.
Joe Biden is planning to push ahead with a broad review of cryptocurrencies — and will ask federal agencies to examine whether the U.S. should create a digital dollar, according to reports.
According to multiple news outlets — Bloomberg and The Wall Street Journal among them — an executive order is going to be released in a matter of days.
Four departments — Treasury, State, Justice and Commerce — will have a set period of time to scrutinize the fast-growing market for digital assets, and produce a report that sets out recommendations for how they should be treated by the government.
There will be a lot to examine, not least because cryptocurrencies are an umbrella term that encompasses private coins such as Bitcoin, altcoins with a smaller market cap, and stablecoins that are designed to be backed on a one-to-one basis by the U.S. dollar.
The Federal Reserve has been accused of dragging its heels when it comes to the creation of a digital dollar — not least because the infrastructure that underpins it would take years to build. By comparison, China's digital yuan is near completion, and extensive trials were already performed using this central bank digital currency at the Winter Olympics.
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What's Being Reviewed
According to the WSJ, the Treasury Department will be specifically tasked with determining the risks that cryptocurrencies pose to financial stability — as well as how extensively they may be used for criminal activity, and the threat they pose to national security.
Last month, economists at the Financial Stability Board warned that the threat cryptocurrencies pose to financial stability could "rapidly escalate" if digital assets continue to be integrated into traditional systems.
And in other developments, the Biden administration intends to review the environmental impact associated with Proof-of-Work blockchains — like the one that powers the Bitcoin network.
These plans have been in place for some time, and are not a kneejerk reaction to the fears that Russian oligarchs may try to use cryptocurrencies to sidestep economic sanctions.
Although the prospect of regulation sends chills down the spines of some investors, many crypto businesses believe this has the potential to be a good thing — offering regulatory clarity and allowing them to innovate. At present, cryptocurrencies are subject to some decades-old rules that were initially designed for other asset classes.
In other developments, the European Parliament's Economics Committee is set to vote on a crypto regulation bill next week.
A controversial passage that called on Proof-of-Work blockchains to "meet environmental sustainability standards" so they could be minted and exchanged within the EU has now been deleted, amid fears that this could have led to a Bitcoin ban.
It's hoped that the Markets in Cryptoassets Directive — otherwise known as MiCA for short — will ensure that EU regulations are "friendly" toward innovation and do not pose "obstacles to the application of new technologies."
India's finance minister, Nirmala Sitharaman, has said that she sees clear advantages in the country's plans to launch a digital rupee by the end of next year. According to the Economic Times, she told the India Global Forum's annual summit:
"In this day and age, bulk payments happening between countries, large transactions between institutions and large transactions between central banks themselves of each country are all better enabled with digital currency."
