Introduction
Cryptocurrency is growing enormously with every passing day. Investors perceive it as mainstream investment. News of Bitcoin acceptance in the Ukraine parliament has flashed the lights on the digital assets, popularity of cryptocurrencies and their impact on the economy.
With government officials accepting their wages in Cryptocurrency and governments themselves initiate digital currency throughout the world. There is no surprise that cryptocurrencies have much more to offer. Last week US President Joe Biden signed the world’s first government strategy for refining digital assets. This executive order officially acknowledges Cryptocurrency’s presence in the US.
Cryptocurrency in America
The United States of America is one of the biggest crypto markets. As per the latest statistics, Cryptocurrency has recorded major growth. The overall market cap of cryptocurrencies and digital assets worth $3 trillion in November 2021. It is the Peak of cryptocurrencies. It completely sums up to 40 million cryptocurrency users only in the US. The USA-based crypto exchange CoinBase has 89 million plus users. It shows US citizens are highly interested in Cryptocurrency.
Being such a huge market, the US government has decided to regulate it by passing an executive order. The executive order focuses on developing policies and recommendations related to digital assets. It supports the federal reserve to continue its research in this sector. It also specifies the treasury department to generate a complete report based on the future of money and payment systems. We will discuss six aspects covered in the executive order launched by Biden’s administration. I would recommend you to look at this video from Bloomberg technology. In this video, former Andreessen Horowitz, Head of Global Policy Tomich Tillemann discusses the executive order and Bitcoins price.
1) Investors protection
The primary goal of the executive order is to protect investors and businesses that are heavily in cryptocurrencies and other digital investment models. The order requests financial regulators of the country’s US treasury, the Fed and securities and exchange commission along with banking regulators to generate public reports within a period of 5 to 6 months. It will help the public know more about the financial markets and cryptocurrency sector.
Cryptocurrencies being a recent concept and growing at a greater rate, these reports from financial regulators can educate the investors regarding the vulnerability, risk and other opportunities. It will help the investor make a well-informed decision and pave the way for institutional adoption of these digital assets.
Some crypto experts welcomed this order on a positive note. Cleve Mesidor claims that this is the step in the right direction and believes that it benefits middle-class Americans adopting blockchain. She also suggested that the government should prioritize skill training for investors, entrepreneurs, and small business owners in urban and rural communities regarding the same.
2) Increasing financial stability
Cryptocurrencies are known for their volatile nature and price fluctuations. As per the order, the financial stability oversight council will convene and monitor excessive risk generated from the digital world to the US financial system. Particular policies and recommendations are developed on the regulatory gaps to mitigate these risks.
The order supports the US government to start the required actions. Analyze and support technological advances without compensating the privacy, security, and exploitation. It can effectively educate the public regarding the risk associated with digital assets.
In the long-term, this is positive for the crypto market and is necessary to allow it to grow further, mature and be more accessible to institutional investors- Tal Elyashiv, founder of SPiCE VC.
3) US competitiveness on the global stage
One of the main focuses of the executive order is to increase US leadership in the digital space. As for the executive order, the department of commerce is to establish a complete framework to improve competitiveness and leadership of the US government in blockchain technologies. The government has seen the power of these technologies and wants to dominate the sector in the future.
A complete framework to provide the required leverage for the US government in the digital technology. It is much welcome among other US-based crypto industry figures like coinbase and Kraken. It will provide a competitive edge for these establishments on comparing other global organizations. It provides an opportunity for the US to dominate technological innovation in the coming years.
Aron Klein – is one of the senior members in economic studies at Brookings institution, feels that the executive order sets out a clear game plan for the government to regulate the crypto sector and provide a clear insight. The EO aims to do this by publishing a perfect framework for agencies to integrate their priority into research and development.
4) Inclusion of finances and curbing illicit finance
The overall digital finance sector in itself is highly diversified. The various assets like cryptocurrencies, NFT’s keep the investors divided, where some are aware of technologies and some are not. The executive order will promote the perfect inclusion of these financial services.Despite being transparent, they are often subjected to multiple risks. Some of the biggest heists in cryptocurrency resulted in a loss of millions of dollars for the investors.
It is crucial to mitigate illicit finance and enhance national security. The executive order focuses on reducing the risk due to the illegal use of digital assets. It provides direction to the US government to focus on mitigating these risks. As per the order, the government directs agencies to work with other partners to align capabilities, partnerships, and international frameworks to reduce risk effectively. It is an advantage for the investors.
5) Responsibility in innovation
The executive order also emphasizes making innovation much more responsible and eco-friendly. It is a universal truth that Bitcoin mining consumes enormous amount of energy. Biden has ordered the government to study ways to make crypto innovation more responsible and reduce its effect on the environment. The executive order supports technology and development. The government will support the design and implementation of digital assets. They highly prioritize the privacy of the users and eliminate unwanted exploitation.
6) US Central Bank digital currency.
Another part of the order is the directive to explore a central bank’s digital currency. It provides the authority of the panel to analyze and provide additional research on developing the US CBDC. With many countries like India and China focusing on Central Bank digital currencies, the US version is much anticipated.
The related technological infrastructure is well accessed. The order encourages the federal reserve to continue its research in this particular aspect. In the fact sheet released by the White House, the issue of CBDC is done based on a national interest. It supports experiments in multiple countries and promotes a CBDC consistent with democratic values. I would recommend you look at the fact sheet published by the US government. It contains all the details regarding the executive order.
Downsides of the executive order
Despite being welcomed in the crypto sector, some authorities have also expressed issues underpinning the crypto executive order. Some also perceive it as a threat to smoother innovation.The order denotes an opportunity to reinforce the American leadership in the global financial system and technological Frontier with cryptocurrency growth. The US government is using cryptocurrencies to dominate the world. It is mentioned in the fact sheet to integrate with various cryptocurrency regulation agencies to draft the policies that cover the need for the agencies to abide by rules and regulations is not provided.
I would suggest you to go through: what did Biden get wrong on crypto? The new order threatens to smoother innovation– by John bureau – In this article, he has mentioned his opinion on this particular order. It is better to know his perspective of this order.
EO benefits for crypto investors.
There is no doubt that executive order is beneficial for the crypto sector. It primarily focuses on regularizing the crypto sector in the US and having a close watch on its functioning system. With all the regulatory bodies analyzing the cryptocurrency sector, one can easily find the pitfalls, drawbacks, and hidden benefits. By publicly providing a report, it can help global investors to make a much better-informed decision.
However, it is wise to wait until the reports are made public. Altering your crypto portfolio now will not make any sense. The crypto sector is still highly fluctuating. Bitcoin raised by 9% above $40000 and Ethereum’s price also saw a boost as soon as the news was out. Stablecoins are a safer investment tool in the digital asset sector.
Before investing in Cryptocurrency, experts advise prioritizing important aspects in finances like emergencies, eliminating high-interest debt, retirement, and savings. It is always safe to invest less than 5% of your total portfolio in cryptocurrencies. Make sure to do your due diligence before investing in the crypto sector. Also, keep in mind that the crypto sector is highly prone to cybercriminal activity.
Conclusion
The executive order passed by the US government serves as a reminder that cryptocurrency are now under government supervision. On the other hand, it shouldn’t dominate the crypto investors to make alterations immediately disrupting their long-term investment strategies. The Cryptocurrency market cap plummeted by 40% wiping out more than 1.2 trillion US dollars in this january. The geopolitical tension has not just affected cryptocurrencies but the economy All around The World.
The world is still adjusting to the sanctions passing every day and isolation of the Russian economy. The primary fact is that Cryptocurrency and Bitcoin price is still rising Amid the situation. The experts still suggest that investors should make a well-informed decision and not invest more than 5% of their total portfolio in Cryptocurrencies. It can reduce losses and improve gains.