Breaking Down the Cryptocurrency Executive Order

On March 9th, President Biden enacted the Executive Order on Ensuring Responsible Development of Digital Assets. You’ve probably seen a tweet thread or two about it, or perhaps this PYMNT’s article. However, you may still be wondering, like me, what does this mean for crypto? Is this a good thing or a bad thing?

A Brief Overview

Digital currency first rocked onto the scene in 2009 with Bitcoin, so why is now the first time the U.S. Government has addressed crypto, and with such urgency and dedication to boot? The answer lies within the numbers: cryptocurrencies surpassed a $3 trillion market cap in November, a number that is only going to continue growing. With more than 100 countries exploring and developing a central bank digital currency (CBDC), the United States must remain the industry leader in digital assets, and there is no better way to do that than with the full power and support of the U.S. Government.

Let’s break it down together

Comprising of ten sections — (1) Policy; (2) Objectives; (3) Coordination; (4) Policy and Actions Related to United States Central Bank Digital Currencies; (5) Measures to Protect Consumers, Investors, and Businesses; (6) Actions to Promote Financial Stability, Mitigate Systemic Risk, and Strengthen Market Integrity; (7) Actions to Limit Illicit Finance and Associated National Security Risks; (8) Policy and Actions Related to Fostering International Cooperation and United States Competitiveness; (9) Definitions; and (10) General Provisions — the Executive Order has six main areas of focus:

• Consumer and investor protection
• Protecting financial stability
• Preventing illicit finance
• Advancing U.S. leadership in the global financial system and economic competitiveness
• Promoting financial inclusion
• Encouraging responsible innovation

Section 1: Policy.

In this introductory section, the White House acknowledges the growth of digital currency and its many benefits, such as heightened security, stability, and freedom. President Biden celebrates the development of crypto further by explaining that the Government needs to evolve and align its interests to that of the digital currency world to keep up and devote its vast skills and resources to ensuring the safety and security of digital currencies and transactions.

Section 2: Objectives.

Arguably the most crucial part of this Executive Order, in the “Objectives” section, the President identifies current and potential problems surrounding cryptocurrency and outlines the steps the U.S. Government intends to take to mitigate these issues and remain at the forefront of innovation in the digital currency sphere. Further elaborating on these plans in Sections four through eight, the problems and solutions raised in the Order include privacy and data breaches, abusive practices, regulatory and statutory violations, and fraud; with the promise of an interagency cooperation in charge of overseeing meticulous research and development of plans to mitigate risks for consumers, investors, and businesses.

Section 3: Coordination.

The Assistants to the President for National Security Affairs and for Economic Policy will coordinate and oversee, through the interagency process detailed in the February 2021 Memorandum on Renewing the National Security Council System, the actions necessary to carry out this Executive Order — ensuring adherence to the rules, safety, and compliance. Other key players in this interagency process include the Secretaries of State, Treasury, Defense, Commerce, Labor, Energy, and Homeland Security, and the Attorney General, to name a few. Additionally, representatives of other executive departments and agencies may be invited to participate in the interagency collaboration as needed.

Section 4: Policy and Actions Related to United States Central Bank Digital Currencies.

President Biden’s Administration is placing the highest urgency on research and development on potentially creating a United States central bank digital currency (CBDC) for a couple of key reasons. The Administration recognizes the vast benefits of a digital currency system and the urgency of the digital revolution we are pioneering — stating that, “Sovereign money is at the core of a well-functioning financial system, macroeconomic stabilization policies, and economic growth.” A CBDC refers to a form of digital currency that is a direct liability of the central bank. Instead of wasting time and resources printing money, the central bank issues electronic coins and/or accounts supported by the total credit and faith of the government.

Section 5: Measures to Protect Consumers, Investors, and Businesses.

Citing the veritable risks arising from the increased use of digital assets — such as privacy and data breaches, unfair or abusive practices, and regulatory and statutory violations — the Administration has appointed members of the interagency cooperation to diligently research and develop reports within 180 days from the date of this Order, detailing every nook and cranny of the digital economy. The goal? To identify the risks and shortcomings and develop plans to mitigate such findings.

Section 6: Actions to Promote Financial Stability, Mitigate Systemic Risk, and Strengthen Market Integrity.

Within 210 days from this Executive Order, the Secretary of the Treasury will assemble the Financial Stability Oversight Council (FSOC) to produce a report identifying risks to financial stability and regulatory gaps posed by digital assets, including recommendations and any proposals that address said risks and gaps.

Section 7: Actions to Limit Illicit Finance and Associated National Security Risks.

Highlighting the rise in sophisticated cybercrime on digital assets, the Executive Order puts forth three actions to locate and mitigate such cybersecurity risks:

• Within 90 days of submission of their original report to the Congress of the National Strategy for Combating Terrorist and Other Illicit Financing (the “Strategy”), key players of the interagency cooperation, including the Secretaries of Treasury and State, will return to the President supplemental annexes providing insight into the illicit financial risks presented by digital assets.
• Within 120 days, these same department heads will develop a cooperative plan from the Strategy’s findings on the hazards of digital asset-related finance.
• Within 120 days after the completion of each of these reports — the National Money Laundering Risk Assessment; the National Terrorist Financing Risk Assessment; the National Proliferation Financing Risk Assessment; and the updated National Strategy for Combating Terrorist and Other Illicit Financing — the Secretary of the Treasury will reconvene with the relevant agencies through the interagency process to talk through and consider each perspective on opportunities to alleviate such risks through regulation.

Section 8: Policy and Actions Related to Fostering International Cooperation and United States Competitiveness.

President Biden explains that international cooperation is crucial to the growth of digital assets and securing the United States’ place in the upper echelon of the global digital economy, putting forth four action items supporting this policy. These four actions span from 90 days to one year of the date of this Order and outline the research and reports required from the interagency cooperation to identify any weak points, successes, and growth opportunities.

Section 9: Definitions.

A section not wholly necessary for those of us who have been living, working, and playing in the digital currency space; this is where the definitions for “blockchain,” “central bank digital currency,” “cryptocurrencies,” “digital assets,” and “stablecoins” live.

Section 10: General Provisions.

The “General Provisions” section is required at the end of any White House Executive Order and does not necessarily affect the content of the order itself. The “General Provisions” states that nothing in the above order shall be construed to positively or negatively affect an executive department's authority or functions.

Is this Executive Order good or bad news for crypto?

Described as a “watershed moment” for cryptocurrency, the U.S. Government waking up to crypto is monumental, akin to the governmental wake up to commercial internet in 1996 and 1997.

The very morning this Executive Order was released, Bitcoin jumped 8%, underscoring the belief that a government-wide initiative for the digital currency industry spells good news for crypto investors. However, we would advise proceeding with hopeful caution, as we could be approaching the most crucial part of any revolution, financial or otherwise: Standing firm and not allowing our movement to be taken from our hands and shaped into something we have no interest in, that does not fit our needs. We will certainly be following this story very closely.