Biden moves to strengthen cryptocurrency oversight and protect consumers

WASHINGTON (March 10, 2022)—President Joe Biden signed an executive order Wednesday aimed at strengthening federal oversight of cryptocurrency and protecting consumers from potential fraud.

The move marks the most significant effort by the federal government to install guardrails and regulations governing the developing cryptocurrency markets.

The executive order:

• Directs the Treasury Department to assess potential risks of cryptocurrency and to ensure sufficient regulatory oversight to protect consumers, investors and the economy.

• Encourages the Financial Stability Oversight Council to identify systemic financial risks posed by cryptocurrencies and take steps to mitigate such risks.

• Directs relevant U.S. agencies to coordinate efforts to combat the illegal use of cyptocurrencies and work with international agencies to do the same.

• Directs the federal government to explore the creation of a U.S. Central Bank Digital Currency in the event such an institution is "deemed in the national interest."

Biden's order "will help position the U.S. to keep playing a leading role in the innovation and governance of the digital assets ecosystem at home and abroad, in a way that protects consumers, is consistent with our democratic values and advances U.S. global competitiveness," National Economic Council Director Brian Deese and National Security Advisor Jake Sullivan said in a joint statement.

"We are clear-eyed that 'financial innovation' of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk," Deese and Sullivan said. "This history underscores the need to build robust consumer and economic protections into digital asset development."

Shortly after the executive order was announced, Secretary of the Treasury Janet Yellen said in a statement the White House's executive order "will support responsible innovation that could result in substantial benefits for the nation, consumers, and businesses."

"Under the executive order, Treasury will partner with interagency colleagues to produce a report on the future of money and payment systems," Yellen said.

Cryptocurrency industry participants praised the executive order, which was seen as offering regulations in a new and unknown segment of the finance industry.

"It was better than I thought it was going to be," Kristin Smith, executive director of the Blockchain Association, a cryptocurrency industry group said. "Given all of the fear, uncertainty, and doubt that has been out there about a regulatory crackdown, I think this is obviously in stark contrast. This is much more positive and thoughtful."

Anchorage Digital co-founder and CEO Nathan McCauley called the executive order a "shot in the arm for crypto" and said that the action offered a balance of "responsible innovation" by the Biden administration.

"The crypto community needs to recognize that, for the benefit of our industry, regulators have a role to play in the crypto ecosystem," McCauley said. "Today's executive order makes it clear: this isn't them-against-us."

In a statement on Twitter, U.S. Securities and Exchange Commission Chairman Gary Gensler said he looked forward "to collaborating with colleagues across the government to achieve important public policy goals: protecting investors & consumers, guarding against illicit activity, & helping ensure financial stability."

Some Democratic lawmakers on the Senate Banking, Housing and Urban Affairs Committee praised Biden's order.

The panel's chairman, Sen. Sherrod Brown, D-Ohio, said in a statement that "it's imperative we strengthen our financial resilience and national security right now."

"That includes protecting Americans from the risks of crypto to our economy and ensuring crypto can't be used to skirt the law," Brown said. "The president is right to take a whole-of-government approach to addressing cryptocurrencies and considering a central bank digital currency."

Pennsylvania Sen. Pat Toomey, the ranking Republican on the banking committee, said in a statement he was "encouraged to see the Biden administration acknowledge that digital assets, including cryptocurrencies and the underlying technology, have tremendous potential benefits."

"The executive order also underscores the need for Congress to enact a regulatory framework specific to digital assets," Toomey added. "This technology empowers individuals, and they deserve to have a say in crafting thoughtful legislation. The administration should resist the urge to stretch existing laws in an effort to expand its regulatory authority."

Sen. Elizabeth Warren, D-Massachusetts, has been an outspoken critic of the current state of cryptocurrency regulation and is crafting a bill targeting cryptocurrency in the current Russia sanctions. She endorsed Biden's effort to enhance federal oversight.

"I've been ringing the alarm bell on crypto, from consumer protection to the environment to national security—especially since Russian elites can use digital assets to undermine sanctions," Warren tweeted. "@POTUS is right to spotlight crypto's risks and we need strong rules before it's too late."