February could mark an important milestone in the history of cryptocurrency, as the Biden administration is expected to release a set of regulations for the industry as it continues to grow into the mainstream.
The governmentwide strategy would coordinate regulations across a number of agencies, tasking them with assessing risks and opportunities presented by the alternative currencies.
BITCOIN WORTH LESS THAN HALF WHAT IT WAS IN OCTOBER AS MARKETS DROP
Reports from Bloomberg and Yahoo! Finance reporter Jennifer Schonberger say that a National Security Council memorandum will also ask federal agencies to look into the idea of a central bank digital currency.
The White House did not respond to requests for comment.
While cryptocurrency is a high-growth industry, it is also considered by most to be a risky type of asset, and investors typically shy away from risky assets when there is market uncertainty as there is now. Expectations for interest rate hikes have grown over the past several weeks as inflation remains persistently high and sticky.
Sources told Bloomberg that meetings have already been held toward crafting the regulations and that the effort will put the White House front and center of Washington’s crypto strategy.
Among the concerns associated with the currency is high energy use, which was cited as a reason why China banned the practice and the United States subsequently became the world’s largest bitcoin mining lab. A research paper led by a team including University of California, Berkeley professor Matteo Benetton found that just in upstate New York, small businesses and households pay $108 million and $218 million extra annually because of cryptomining demand effects.
But the larger threat of cryptocurrency is its potential to destabilize the dollar as the dominant world currency, especially if China or another country launches a government-backed digital coin.
“Clarity on U.S. rules would help in the sense that they would keep cryptocurrencies and the crypto sector in check,” said Will Cong, a Cornell University professor who researches financial technology.
Introducing its own digital dollar is one way the U.S. can help maintain the status of its currency, Cong added.
Various government agencies have already gotten involved. Part of the Infrastructure Investment and Jobs Act included introducing requirements for some digital transactions and also changed an anti-money laundering cash reporting requirement to include digital investments starting in 2023.
Federal Reserve Chairman Jerome Powell has also advocated for a digital dollar, arguing last year, “You wouldn’t need stablecoins. You wouldn’t need cryptocurrencies if you had a digital U.S. currency.”
Cong highlights other problems with crypto, such as fake trading and its use for money laundering, drug dealing, and ransomware attacks. But he says the government will be limited in how much it can truly handle the industry.
“Due to the nature of the technology, it is just difficult to fully regulate the cryptocurrencies,” he said. “For all these reasons, in addition to clarifying the regulatory rules, it is important to accelerate the pace of digitizing dollars.”
For some, this is an asset, as cryptocurrency is often touted as a way to democratize finance.
While details will emerge in the coming weeks, the stakes are high for the White House when it comes to coordinating the regulation of a new industry that is already upending the financial world.
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“The move sends a strong signal,” Cong said. “The main strength is that the White House is going to step up as the chief coordinator. Without such a leadership role, various regulatory agencies are fighting battles here and there. Each one wants more regulatory oversight under its control, but the efforts are not synced or standardized and sometimes are incompatible.”
Original Location: White House expected to issue cryptocurrency regulations next month
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