U.S. President Joe Biden signed an executive order on 9 March 2022 to direct federal agencies to examine potential regulatory changes as well as the risks and benefits posed by cryptocurrencies. While widely hailed as a major success by the crypto community, as evidenced by the massive 10% spike in the price of Bitcoin, the more sceptical members see this further regulation and oversight as a potential headwind for cryptocurrency assets as a whole.
As the news was digested and market volatility began to ease, some experts were calling for more clarity on the implications of the policy shift by the Biden administration. For now, we know that the measures focused on six key areas: consumer protection, financial stability, illicit activity, U.S. competitiveness, financial inclusion and responsible innovation.
Two of these areas will be key drivers in the discussion for the regulation of retail and institutional participation within the crypto industry. Both consumer protection and illicit activity may lead directly to heightened reporting obligations for firms engaging in any form of crypto related OTC trading.
The inclusion of ‘financial stability’ paired with the POTUS’s mention of a digital dollar further calls into question the current ‘stable coin’ rhetoric and how traditionally pegged currencies have fared well until a major black swan event. It appears the U.S. government would like to try and get ahead of the curve to impose boundaries on the crypto industry, while walking a tight rope between stifling further innovation, which is the backbone of the U.S. economy.
Moving forward, only time will tell whether this change in policy will lead to a headwind or a tailwind for cryptocurrencies, however it appears highly likely that many areas will be subject to further oversight and similar rules and regulations to that of traditionally traded assets.
Further information can be found below on the current reportability of cryptocurrencies under different global regimes: