What does Biden’s Bitcoin Bill mean for the future of crypto, and what needs to happen next?
US President Joe Biden’s much-anticipated Executive Order on cryptocurrency was finally signed off this week, triggering a surge in value across the crypto markets.
The price rises were, however, short-lived after being impacted by incoming news surrounding inflation rates across Europe.
European financial influence aside, it has been noted by many market analysts that the move to help regulate cryptocurrency – albeit criticised for being ‘late to the party’ – will pave the way for wider acceptance of digital assets globally, as well as have a positive effect on their value.
This was certainly notable in the aftermath of Biden putting his signature to the order, with Bitcoin spearheading a charge northwards as prices rose across the board.
To be fair, those prices were already rising after United States Treasury Secretary Janet Yellen accidentally released her response to the president’s declaration of the order a day before it even happened.
Yellen’s office was swift to remove the statement, but not before it had permeated every possible crypto news avenue, reversing a recent price slump.
Ahead of Yellen’s leak, Bitcoin had been languishing just above $38,000. Once news spread, it quickly heaved above $41k, then on to $42,500 when the order became official.
Unfortunately for traders, the upward momentum dispersed once the reality of incoming interest rates rises in Europe came into focus.
However, the positivity of the US now openly embracing cryptocurrency continues to be viewed as a major seal of approval throughout the industry as it effectively pushes the Treasury Department to develop crypto regulations, as well as investigate its own ‘digital dollar’.
Federal regulation of crypto
Mikkel Morch, executive director at hedge fund ARK26, was one of the first to react.
“The leaked comments by Secretary Janet Yellen show that the Biden administration will set a friendly and constructive tone for the upcoming federal regulation of crypto – this development defies previous market consensus where investors thought the executive order may be much more hostile,” he said.
“The fact that the price of Bitcoin virtually smashed the psychological barrier of $40k shows that investors feel this is a very promising development.
“It is to be hoped that federal agencies – and especially the SEC – will take note of this guidance and act accordingly. For example, investors have long expressed interest in a spot Bitcoin ETF in the US. Its approval by the SEC in the near future now seems much more likely. If that happens we may as well see another explosive leg up in Bitcoin and the broader crypto market.”
Duplicating existing work?
However, Jackson Mueller – Director of Policy, Government Relations at financial markets infrastructure technology company Securrency, raised a number of concerns with the order.
“The Executive Order issued by the Biden Administration demonstrates that digital assets are here to stay and, as such, the Administration is now fully invested in developing an appropriate government-wide approach to the responsible development of digital assets,” he began.
“However, there are a few concerns raised by this Executive Order. First, is the administration unintentionally duplicating existing or ongoing work from a variety of agencies that could lead to disparate views between the Administration and independent financial regulatory authorities?
“Second, is the Administration setting up a clash with Congress, particularly as it relates to activating the DOJ to determine if legislative changes are necessary to launch a CBDC? Several lawmakers and Federal Reserve officials seem to think so, but the Administration could view this differently.
“Third, in seeking to address systemic risks from digital assets, which include stablecoins, the required Treasury-led FSOC report could provide further ammunition for the FSOC to jump ahead of Congress in setting the regulatory framework for stablecoins, which would mark a deviation from the recommendations contained in the PWG Stablecoin report and recent testimony from Under Secretary for Domestic Finance Nellie Liang.”
Immediate regulatory framework needed
Adrian Brink, meanwhile, called for immediate regulatory framework.
“The most immediately helpful actions would be for the administration to first, draft a straightforward and streamlined regulatory framework,” said the founder of proof-of-stake blockchain protocol Anoma.
“Second, they should establish a digital USD that can be transferred between all chains in a permissionless fashion. In other words, a digital version of the USD issued by the US Federal Reserve should be usable across chains (for example on Ethereum).
“Governments should also support research into distributed systems and privacy. Distributed systems (or, blockchains) increase the resilience of their country’s financial infrastructure. By decentralizing the financial system, countries can achieve much higher fault tolerance and make themselves harder to attack by adversaries.
“Additionally, governments should support technologies that safeguard privacy. These technologies protect individuals from foreign hostile actors and data hungry multinational corporations. The alternative is that anyone with a computer and internet could run a global financial surveillance program similar to the NSA over US citizens.
“In summary, governments should invest in distributed systems and technologies that safeguard privacy to build more resilient systems, and provide asymmetric advantages in national defence.”
Necessary for the industry
Jaime Baeza, CEO of Miami-based crypto hedge fund ANB Investments, saw the Executive Order in a positive light, stressing that regulation was necessary for the development of the industry.
He said: “The most positive aspects are: (i) policy makers and regulators are educating themselves on different aspects of the industry, whilst maintaining dialogue with key players in the ecosystem (ii) recognition by policymakers that the US needs to maintain a technological leadership in this rapidly growing space, supporting innovation while mitigating risks and (iii) continue exploring the possibility of a CBDC.
“For a successful and efficient regulation of the industry, it is vital regulators take the time and effort to educate themselves, in an open dialogue with key stakeholders and industry insiders.
“This dialogue will likely conclude that digital assets are a completely different asset class, and that regulation needs to be tackled accordingly. Digital assets do not fall into current existing asset categories: commodities, currencies, equities etc. Thus, regulation is best approached from a blank canvas.”