By FATIMA HUSSEIN – Associated Press
WASHINGTON (AP) — President Joe Biden on Wednesday signed an executive order on government oversight of cryptocurrency, prompting the Federal Reserve to consider whether the central bank should step in and create its own digital currency.
The Biden administration views the cryptocurrency’s explosive popularity as an opportunity to examine the risks and benefits of digital assets, said a senior administration official who previewed the order Tuesday on condition of anonymity set by the White House.
As part of the executive order, Biden has also directed the Treasury Department and other federal agencies to study the impact of cryptocurrency on financial stability and national security.
Brian Deese and Jake Sullivan, Biden’s top economic and national security advisers, respectively, said the order establishes the first comprehensive federal digital asset strategy for the United States.
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“This will help ensure the U.S. continues to lead the innovation and governance of the digital asset ecosystem at home and abroad, in a way that protects consumers, is consistent with our democratic values, and enhances the global competitiveness of the industry.” USA promotes,” Deese said, and Sullivan said in a joint statement on Wednesday.
The action comes as lawmakers and administration officials are raising concerns that Russia could use cryptocurrencies to avoid the fallout of sanctions imposed on its banks, oligarchs and oil industry as a result of the invasion of Ukraine.
Last week, Democratic Sens. Elizabeth Warren, Mark Warner and Jack Reed asked the Treasury Department to provide information on how it intends to prevent the use of cryptocurrencies to circumvent sanctions.
The Biden administration has argued that Russia cannot offset the loss of US and European business by turning to cryptocurrency. Officials said the Democratic president’s order had been in the works for months before Russia’s Vladimir Putin invaded Ukraine last month.
Daleep Singh, a deputy national security and economic adviser to Biden, told CNN on Wednesday that “crypto really isn’t a workaround for our sanctions.”
The executive order was widely anticipated by the financial industry, crypto traders, speculators and lawmakers who have compared the cryptocurrency market to the Wild West.
Despite the risks, the government says, surveys show that about 16% of adult Americans — or 40 million people — have invested in cryptocurrencies. And 43% of men aged 18-29 have invested their money in cryptocurrency.
Coinbase Global Inc., the largest cryptocurrency exchange in the United States, said the company has not seen a recent surge in sanctions evasion activity.
Treasury Secretary Janet Yellen said last week that “many participants in cryptocurrency networks face anti-money laundering sanctions” and that the industry is not “fully one where things can be circumvented.”
As for the Federal Reserve’s involvement in digital assets, the central bank issued a paper in January that said a digital currency “would best meet the needs of the country” through a model where banks or payment companies hold accounts or create digital wallets.
Some digital currency participants are welcoming the idea of increased government involvement in crypto.
Adam Zarazinski, CEO of Inca Digital, a crypto data company that works for multiple federal agencies, said the deal presents an opportunity to provide “new approaches to funding.”
“The US has an interest in promoting financial innovation,” Zarazinksi said. He added that China and Russia are getting into crypto and building their own currency. According to White, more than 100 countries have started or are testing their own digital sovereign currency house.
Katherine Dowling, general counsel of Bitwise Asset Management, a cryptocurrency asset management firm, said an executive order providing more legal clarity on government oversight would be “long-term positive for crypto.”
But Hilary Allen, a professor of financial regulation at American University, warned against moving too quickly to adopt cryptocurrencies.
“I think crypto is a place where we should put the brakes on this innovation until it’s better understood,” she said. “As crypto becomes more integrated into our financial system, vulnerabilities are emerging not just for those who invest in crypto, but for everyone who participates in our economy.”
On Tuesday, the Treasury Department said its financial literacy department would work to develop consumer-friendly materials to help people “make informed decisions about digital assets.”
“History has shown that without proper safeguards, private forms of money can potentially pose risks to consumers and the financial system,” said Nellie Liang, undersecretary for domestic finance.
Associated Press writers Thalia Beaty in New York and Christopher Rugaber in Washington contributed to this report.
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