Last Wednesday, President Biden issued an executive order to ensure the responsible development of digital assets in the United States. The order provides the basis for extensive research to help guide and understand what is still a new but rapidly evolving technology.
As of November 2021, the market capitalization of the digital asset industry has soared to $3 trillion from November 2016 (when it stood at $14 billion). With the U.S. facing a new social dilemma between ransomware and sanctions evasion, the cryptocurrency industry is very receptive to what initially appears to be a very analytical approach that requires research by various U.S. agencies.
Miami, FL, USA – September 25, 2021: FTX Arena Downtown Miami FL Former American Airlines Arena
In an interview with Fox TV's Neil Cavuto, FTX.US President Brett Harrison said institutional money may begin to pour into the cryptocurrency economy in this way. "Some level of regulation is important to allow institutions to come in and have the confidence to put money into emerging areas like cryptocurrencies," Harrison said. On the order, Harrison dismissed it as "a call from …… for people to do research and return reports to understand what areas need regulation and what areas don't need regulation."
Ari Redford, head of legal and government affairs at TRM Labs, described the crux of the order as a way to coordinate the U.S. government's activities around cryptocurrencies. "The executive order is really a call to coordinate – to play quarterback – to ensure that regulators work together to provide a clear and consistent framework for cryptocurrency regulation, rather than engaging in disparate work streams. The real work begins now," Redford said.
Perianne Boring, Founder and CEO of the Digital Chamber, testifies before the Senate… [+] Ag hearing on examining digital assets: risk, regulation and innovation. Sam Bankman-Fried, Founder and CEO of FTX, also testified at the February 2022 hearing.
Teana Baker-Taylor, chief policy officer at the Digital Chamber of Commerce, sees the order as a reinforcement of the already rapidly growing cryptocurrency economy. "The executive order underscores that the government recognizes that cryptocurrencies are here to stay and that the U.S. government is taking digital assets seriously," Taylor said. She also focused on the benefits of a cryptocurrency regulatory regime that will benefit the cryptocurrency economy. "We expect to focus on developing a regulatory regime in the coming years, which we believe is critical to supporting sustainable industry growth while ensuring consumer protection and maintaining U.S. competitiveness," Taylor said.
Redford noted that his biggest takeaway from the Order was "the embrace of cryptocurrencies. "The order speaks to the need for U.S. leadership in the digital space race, the power and promise of financial inclusion, and the growing cryptocurrency economy. Of course, the focus on risks and challenges is warranted – but it is framed by the need for thoughtful regulation and leadership," Redford said.
Key to the executive order is the "whole-of-government approach" taken in the order, and DavisPolk LLP seems to be very excited about the order's K-line chart for reporting when it is due. In addition, the order looks at multiple aspects of the potential impact of digital currencies and specifically seeks to ensure that central bank digital currencies (CBDCs) are ready when needed. "I believe that a 'whole-of-government' approach has the potential to really drive regulatory clarity, encourage adoption and, hopefully, just maybe, spread some of the counter narrative that the industry has been the focus of skeptics," said Taylor.
Images of the number of reports requiring action or recommended from Biden's executive order …… [+] Published by DavisPolk Law Firm on ensuring responsible exploitation of digital assets.
Davis Polk & Wardwell LLP
Cryptocurrencies as an industry are used to bucking the trend, but it may take some time for the industry to get used to it, considering not only the interests of governments, but also how institutional investors view the opportunities of the cryptocurrency economy, presenting itself as a leader in the new economy.
Overall, the order was crafted to benefit the industry and at least demonstrates the U.S. government's attempt to take an organized and fair approach to cryptocurrencies across the government. Taylor commented on how the Digital Chamber is advocating for this approach by the U.S. government at the highest levels of government. "We are pleased to see that many of the principles outlined in our 2019 'National Blockchain Action Plan' are reflected in the announcement, which calls for a holistic, coordinated approach to policy and framework development," Taylor said.