Prices of bitcoin and other cryptocurrencies surged on Wednesday, March 9, 2022. These higher prices came after US President Joe Biden signed an Executive Order addressing the lack of a framework for the US development of cryptocurrency. However, some critics think Biden’s executive order could leave the US lagging behind the rest of the world. Let’s comb through this new development to understand better how it will impact cryptocurrency developments and growth in the industry.
Understanding the Long-Awaited Directive
Nearly 40 million Americans invest in, trade, or use cryptocurrencies. So, it’s no surprise that digital assets have experienced massive growth over the past few years, increasing from a $14 billion market cap to $3 trillion in less than five years. What’s more, more than 100 countries are piloting or considering Central Bank Digital Currencies (CBDCs).
However, not everyone in the US Administration has always agreed on unifying the regulation and oversight of digital assets. For example, we’ve seen reports of delays due to disagreements between White House officials and Treasury Secretary Janet Yellen. And that dividedness isn’t likely to change soon, no doubt. Nevertheless, a White House fact sheet outlines some background on the long-awaited directive:
“The rise in digital assets creates an opportunity to reinforce American leadership in the global financial system and at the technological frontier but also has substantial implications for consumer protection, financial stability, national security, and climate risk. The United States must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system, and the climate. And, it must play a leading role in international engagement and the global governance of digital assets consistent with democratic values and US global competitiveness.”
The Executive Order’s 6 Key Priorities
From what we can tell, the crypto industry has responded positively to the new policy rollout — hence the $42,000 price surge of bitcoin and other cryptocurrencies on Wednesday! Still, let’s look next at the six critical areas of the measures President Biden spotlights. According to the White House fact sheet (mentioned earlier), here’s a summary of actions the new Order calls for:
- Protect US consumers, investors, and businesses by better assessing and developing policy recommendations regarding the rapidly-growing and changing digital asset sector and financial markets.
- Protect US and global financial stability by identifying and mitigating economy-wide risks from digital assets, addressing regulatory gaps, and recommending policies.
- Mitigate various risks (i.e., illicit finance, National Security Risks) due to digital asset usage, ensuring international frameworks, capabilities, and ecosystem uniquified preparedness to respond to risks.
- Promote US competitiveness and leadership by establishing a framework to leverage digital asset technology.
- Promote safe access to financial services by informing the US government’s approach to digital asset innovation.
- Support technological advances relating to the responsible development, design, and implementation of digital asset systems.
Lastly, the Executive Order lays out a call to explore a US Central Bank Digital Currency by prioritizing research and development in the digital asset space. With the Administration’s commitment to work across agencies and with Congress, we anticipate our leaders establishing policies that protect against risks and usher in responsible innovation.
A “Watershed” Moment for Crypto
Some experts think the government had a wake-up call to the commercial internet in 1996 and 1997. Many of those same experts believe that the delivery of this new policy is similar to that big change, creating a unique “watershed moment.”
Perhaps this agenda has arrived at the perfect time, working to remove uncertainty and doubt. After all, the crypto industry has already had its fair share of regulatory hiccups and scandals. Naturally, events such as BlockFi’s $50 million fine from the SEC, for example, only rock the industry as a whole.
As a result, we have a handful of risk management considerations related to the new Executive Order, such as:
- Expect more litigation. More governmental and regulatory eyes on the industry often prompt more litigation. In turn, this uptick will require insurance products without crypto exclusions to protect companies adequately in this sector.
- Partner with credible law firms. We recommend that crypto companies work with credible law firms to service emerging industries.
- Be proactive in risk management. Make sure that crypto leadership teams can articulate business models well and show they can be proactive about risks.
Understanding the details of what coverage your company needs can be a confusing process. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.