White House is preparing to issue an executive order on cryptocurrencies

Joe Biden's White House is expected to issue an executive order in the coming weeks regarding actions the U.S. government will take on digital assets.

A source "familiar with the White House's plans" told Barron's that the executive order would be issued in the form of a national security memorandum. Biden's memo would assign a number of government entities to study cryptocurrencies, stablecoins and non-fungible tokens (NFTs), with the goal of developing a workable regulatory framework.

The source said:

“This is to take a holistic look at digital assets and develop a set of policies that will bring consistency to the government’s efforts in this area.”

Rumors of a possible executive order on cryptocurrencies have been circulating in recent days. Earlier this week, Forbes reported that the government agencies could release a report by mid-2022 on the findings of their investigation into "systemic risks of cryptocurrencies and their illicit use."

The rationale for the executive order being national security is that cryptocurrencies are a tool for moving money across borders. Decentralized blockchain technology's ability to circumvent geographic-specific surveillance or rules means that a Biden administration could push for international regulations that are in sync with other countries.

Eric Balchunas, senior ETF analyst at Bloomberg, pointed out earlier today that the Biden administration's view of cryptocurrencies as a national security threat may also be behind the continued rejection of the Bitcoin spot ETF.

He also called the new development a "broader crackdown on cryptocurrencies" in a Jan. 28 tweet.

wider blow

On Jan. 25, House Democrats introduced another piece of legislation that worries the crypto industry — the America Competition Act. Jerry Brito, executive director of Coin Center, a Washington, D.C.-based think tank, pointed to a provision in the proposed bill that would allow the Secretary of the Treasury to ban cryptocurrency exchanges from operating without prior notice.

The so-called "special measures" provision (proposed by @jahimes) would essentially give the finance minister unfettered unilateral powers to ban exchanges and other financial institutions from trading cryptocurrencies. How will it do this?

— Jerry Brito (@jerrybrito) January 26, 2022

Brito said he thought the bill was likely to pass "in some form".

Meanwhile, supporters among lawmakers are trying to smooth the rough edges of legislation that has passed. A bipartisan group of members of the House of Representatives responded to a plea from crypto industry experts asking Biden's nominee for Treasury Secretary Janet Yellen to clarify aspects of the Infrastructure Act related to digital assets. The Infrastructure Act was signed into law last November, and there was some controversy at the time because it defined "brokers" too broadly, including miners, software developers, transaction validators and node operators.

The bipartisan group of lawmakers proposed on Jan. 26 to narrow the information brokers can obtain to prevent “creating an unfair playing field for digital asset transactions and those who offer them.” As currently defined by the bill, some brokers do not have the ability to verify sender and receiver information of cryptocurrencies as required by law. Yellen has yet to respond to the request.

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