The executive order will ask federal regulators to look into the risks that a roughly $1.75 trillion crypto market poses to consumers, investors, and the economy as a whole. According to a senior administration official, federal agencies will have several months to prepare a report with their findings, which will then inform any new regulatory actions the White House takes.
According to a White House fact sheet, roughly 16% of adult Americans, or roughly 40 million people, have invested in, traded, or used cryptocurrencies. The growing popularity of digital assets, which include volatile cryptocurrencies such as bitcoin and so-called stablecoins pegged to assets such as the US dollar, has prompted the Biden administration to centralize its efforts on the subject. For several months, White House officials have been working with the crypto industry and experts to prepare the executive order.
"This is no longer a niche issue, and it's critical that we have the right tools to mitigate the risks to consumers, investors, and, frankly, the entire financial system," said a senior administration official.
According to CoinDesk, Bitcoin's dollar value increased by more than 9% from its 5 p.m. ET level on Tuesday to $42,118.73 on Wednesday. The majority of the rise occurred prior to the formal announcement of the White House's plans, when the Treasury Department accidentally published a statement from Treasury Secretary Janet Yellen on the executive order.
According to Ms. Yellen, the president's order will encourage responsible innovation in digital assets while also addressing risks associated with illicit finance. According to a Treasury spokeswoman, the statement was removed after being published in error and was later reposted Wednesday morning.
Concerns about stricter regulation, according to Chris Bendiksen, head of research at London-based asset management firm CoinShares, may have weighed on bitcoin's value.
"It could be that there's been this looming fear of some negative action by the US government," he speculated.
According to a senior administration official, the Biden administration will examine how cryptocurrencies may undermine US sanctions and efforts to combat money laundering under the executive order. These concerns have grown as the United States imposed sanctions on Russia in response to its invasion of Ukraine. The administration will also investigate the environmental impact of energy-intensive crypto mining.
According to a White House fact sheet, the Biden administration will also formally consider the creation of a possible US digital currency, a cryptocurrency backed by the Federal Reserve. The Federal Reserve is already considering the possibility of a digital currency, which has already been adopted by some other countries, including China. According to a source close to the situation, the executive order will direct the Justice Department to investigate whether Congress would need to approve the creation of a digital currency.
While the White House executive order is in many ways a broad, preliminary review, it opens the door to more substantial federal regulation in a sector that agencies have previously largely avoided or addressed piecemeal.