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It’s been a momentous couple weeks in crypto. In the midst of Russia’s invasion of Ukraine, millions of dollars in cryptocurrency donations have streamed toward the Ukrainian government and relief efforts, providing a lifeline for those unable to access traditional banks. On the flip side, regulators have worried that crypto provides a way for Russian oligarchs to circumvent sanctions (although no concrete evidence has surfaced that this is the case). Earlier this week, rumors spread that President Joe Biden was about to issue an executive order cracking down on crypto, especially with regards to its role in this geopolitical conflict.
But many crypto insiders were pleasantly surprised when the Administration released its executive order on Wednesday, marking the first time the White House has weighed in formally on cryptocurrencies. The order recognized the popularity of cryptocurrencies and directed the U.S. Department of the Treasury and other federal agencies to coordinate their efforts to come up with a regulatory plan. “I am pretty darn optimistic about it,” says Alexis Ohanian, the co-founder of Reddit who is now a major investor in crypto technology. “I’m grateful we’re at the point where the utility of this tech has proven to be very obvious to all levels of our government.”
The order tasks a variety of agencies with studying and planning around cryptocurrency policy in key areas like consumer protection, national security, and illicit finance. It also urges the Federal Reserve to continue exploring the development of a U.S. Central Bank Digital Currency (CBDC)—a digital U.S. dollar that would be widely available to the general public, and could make digital transactions more secure, faster and cheaper. TIME spoke to several leaders in crypto about the executive order. Here the main reasons they’re generally excited.
The tone signals positivity about cryptocurrency
The tone of the executive order is evident from the very first line of the fact sheet, which comments on the “explosive growth” of digital assets. The order then declares that the U.S. “must maintain technological leadership in this rapidly growing space.”
Kristin Smith, the executive director of the Blockchain Association, a D.C.-based crypto lobbying group, says that the order’s language is “incredibly bullish, especially compared to the last Administration, which was much more hostile towards crypto.” (President Trump tweeted in 2019 that he was “not a fan” of cryptocurrencies and that they were “based on thin air.”) “We’re pretty happy; it’s an acknowledgement that this is a growing, important space,” Smith says.
Jeremy Allaire, the co-founder and CEO of Circle, the digital currency company behind the world’s second-largest stablecoin, went a step further, writing on Twitter that the order represents a “watershed moment for crypto, digital assets, and Web 3, akin to the 1996/1997 whole of government wakeup to the commercial internet.” And the market seemed to agree with him: Bitcoin jumped 9% on Wednesday afternoon.
A thoughtful look at risks
Of course, the executive order isn’t uniformly positive: It lays out the many risks of cryptocurrencies, including the prevalence of scams, its use in illicit finance, and environmental concerns.
But Smith says the detail and nuance of the report show the Biden Administration’s commitment to studying the space carefully. “They’ve asked a really good series of questions that relate to a lot of policy goals,” she says. “They’re not pre-determining policy outcomes, but rather have a really methodical and thoughtful process to go about finding answers and figuring out where the regulatory gaps are.”
Setting the stage for regulatory clarity
Over the past couple years, different governmental agencies have jostled for the authority to regulate cryptocurrencies, including the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). While the order doesn’t specifically say who is in charge, it calls on the various regulators to create a united front and to determine spheres of influence, and a chain of command.
These agencies publicly fell in line in support on Wednesday. CFTC chairman Rostin Behnam wrote that the order would “ensure greater cooperation and coordination between various cabinet-level agencies.” SEC Chairman Gary Gensler issued a similar statement on Twitter. Treasury Secretary Janet Yellen wrote in a statement that she would work under the guidelines of the order to “promote a fairer, more inclusive, and more efficient financial system.”
Meanwhile, inside the the crypto world, there are some libertarians who take a hardline view against any sort of regulation. But most of the leaders of cryptocurrency platforms are already complying with government know-your-client (KYC) regulations—and have spoken up about the fact that they want more clarity, not less, on their responsibilities. “There’s a strong case to be made that the lack of regulatory guidance and policy certainty has hindered the ability of responsible investors and entrepreneurs to innovate in this space because they’re unclear of what regulations they may be subject to two, three, four years down the line if they become successful,” says Ariel Zetlin-Jones, an associate professor of economics at Carnegie Mellon University’s Tepper School of Business. “So to the extent that this executive order will spur a wide number of agencies to establish some kind of predictable policy rationale behind how blockchain and crypto innovations will be treated, you would think that would enhance enthusiasm for investing in this space.”
Sam Kazemian, the founder of the stablecoin Frax, agrees. “I don’t see it as black or white. I think in democratic, liberal societies like ours, people want to see regulations, fairness, and transparency,” he says. “We’re very collaborative and cooperative, and want to make sure we’re on the right side of history.”
Crypto lobbying in Washington will only increase
Biden’s order doesn’t actually make any immediate demands, but rather calls for research to unfold over the year, eventually leading to a set of concrete recommendations. Crypto boosters are taking this process as a green light to flood Washington with suggestions. “This [executive order] should be viewed as the single biggest opportunity to engage with policy makers on the issues that matters,” Allaire wrote on Twitter.
The lobbying presence of crypto in D.C. is already sizable: its expenditures rose from $2.2 million in 2018 to $9 million in 2021, according to a report this week by Public Citizen, a progressive advocacy group. The Blockchain Association, one of the largest lobbying groups, is expected to continue to play a significant role in the coming conversations this year. “We’ve already had some people in government reach out to us asking to come in and talk to them,” Smith says. “We’ve got a lot of work cut out for us over the next six or so months.”
“I know a couple regulators and folks in office. They’ve always got my number if they want to talk about this stuff,” Ohanian says. “I’ll certainly continue to be a resource as best as I can.”
The digital dollar is still far away
The issue of Central Bank Digital Currencies (CBDCs) is a contentious one in the crypto community. While having a government-issued digital currency could be useful to foster greater access to the financial system, many feel it would run counter to crypto’s decentralized ideals. Biden’s order doesn’t make a declaration in either direction, but does call for a study into whether a CBDC would “enhance or impede” financial systems and the power of the U.S. dollar.
While a digital dollar would theoretically compete with Kazemian’s stablecoin Frax, he says he’s not particularly concerned with this development. “The government’s timelines… are so slow that the first real world payments, if they ever even happen, won’t be until like 2026,” he says. “That’s why I think it’s important for the private sector and these innovations to stay within the U.S.—and to have people with expertise actually collaborating with the government.”
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Write to Megan McCluskey at [email protected].