Last month, U.S. President Joe Biden issued an executive order, calling for a coordinated effort by federal agencies to research and report on digital assets in 180 days.
Some representatives of the crypto industry are feeling positive about the initiative. They hope the executive order will address the current fragmented regulatory environment in which regulation is often achieved through enforcement actions by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
John Sarson, CEO of Sarson Funds, notes that the executive order shifts the agenda from will crypto assets be normalized to how they will be normalized. Industry participants also consider this step to be a gesture that the U.S. government views blockchain as a significant part of the global economy and acknowledges the economic importance of digital assets.
In addition, possible legislation brings benefit to advisors and traditional investors because it should deliver more crypto products into their investment activities.
Nonetheless, there are serious concerns and practicalities that must be worked out. Adam Blumberg, co-founder of PlannerDAO and Interaxis, a firm that teaches financial advisors about crypto, cautioned that the outcome of an agency’s research will likely be bent toward some type of political aim and biased to grant more power to an agency. He also doubts that the government wouldn’t try to take some of the financial power from the decentralized finance system.
The fundamental opposition to a U.S. digital currency comes from the banking industry. Some argue that each additional digital dollar issued by the Fed would mean one less dollar of bank deposits. This, in turn, would slash the lending power required to support economic growth.
Another worry of crypto enthusiasts is users’ privacy, which shouldn’t be violated by over-regulating. Keeping digital transaction private together with an effective anti-money-laundering regime is a technological challenge that will require time and resources.
What the result of the review will be is yet unclear. The consensus seems to be that some form of new regulations will come from the effort, with some industry participants believing that a new government agency dedicated to the asset class will be established.
One way or another, the process will not be quick. The research and reports to the White House on various crypto-related issues can take up to six months.