President Joe Biden on Wednesday signed an executive order on government oversight of cryptocurrency that urges the Federal Reserve to explore whether the central bank should jump in and create its own digital currency. Under the executive order, Biden also directed the Treasury Department and other federal agencies to study the impact of cryptocurrency on financial stability and national security.
The executive order had been widely anticipated by the finance industry, crypto traders, speculators and lawmakers who have compared the cryptocurrency market to the Wild West.
Despite the risks, the government said, surveys show that roughly 16% of adult Americans — or 40 million people — have invested in cryptocurrencies. And 43% of men age 18-29 have put their money into cryptocurrency.
As for the Federal Reserve getting involved with digital assets, the central bank issued a paper in January that said a digital currency “would best serve the needs” of the country through a model in which banks or payment firms create accounts or digital wallet.
Adam Zarazinski, CEO of Inca Digital, a crypto data company that does work for several federal agencies, said the order presents the opportunity to provide “new approaches to finance.”
“The U.S. has an interest in growing financial innovation,” Zarazinksi said. He added that China and Russia were looking at crypto and building their own currency. More than 100 countries have begun or are piloting their own digital sovereign currency, according to the White House.
Katherine Dowling, general counsel for Bitwise Asset Management, a cryptocurrency asset management firm, said an executive order that provides more legal clarity on government oversight would be “a long term positive for crypto.”
But Hilary Allen, a financial regulation professor at American University, cautioned against moving too fast to embrace cryptocurrencies.
“I think crypto is a place where we should be putting the brakes on this innovation until it’s better understood,” she said. “As crypto becomes more integrated into our financial system it creates vulnerabilities not just to those who are investing in crypto but for everybody who participates in our economy.”
On Tuesday, the Treasury Department said its financial literacy arm would work to develop consumer-friendly materials to help people “make informed choices about digital assets.”