President Joe Biden’s administration expressed concern over recent developments in cryptocurrency markets and their impact on average Americans’ financial health as it introduced a series of reports Friday outlining policy recommendations for regulating digital assets.
Recent turmoil in crypto markets “highlight how, without proper oversight, cryptocurrencies risk harming everyday Americans’ financial stability and our national security,” Brian Deese, director of the National Economic Council, told reporters at Thursday evening press conference.
The Biden administration “believes that now, more than ever, prudent regulation of cryptocurrencies is needed if digital assets are going to play the role we believe they can in fostering innovation and supporting our economic and technological competitiveness,” he added.
The comments accompany several reports issued by the Treasury Department and other agencies Friday morning , as was mandated by an executive order issued by Biden in March.
The reports cover topics ranging from consumer protection and financial stability to the national security implications of cryptocurrencies, and they put forward a series of recommendations that will guide Biden-administration policy on digital assets going forward.
One report recommends that financial regulators and law enforcement should “pursue vigilant monitoring of the crypto-asset sector” and “aggressively pursue investigations … with particular focus on consumer, investor and market protection.”
These statements appear to back up the increasingly aggressive stance that Securities and Exchange Commission Chairman Gary Gensler has taken on the digital-asset industry.
In a speech last week, Gensler argued that the vast majority of crypto projects in the U.S. are currently operating in violation of federal securities law, and present a threat to the financial health of average investors by not adhering to disclosure rules.
In the intervening months between Biden’s executive order and Friday’s reports, cryptocurrency markets have seen significant stress, with the prices of bitcoin
and other digital assets plummeting and many crypto projects entering bankruptcy.
The failures of projects like Terra, Celsius and Voyager have taken a financial toll on many investors in the U.S. and around the world who invested large sums before seeing their tokens collapse in value, or having their accounts frozen.
The administration also expressed concern over the potential for digital assets to facilitate illicit finance, like money laundering, terrorist funding and other crimes, and suggested that Biden is evaluating whether he should recommend that Congress update statutes like the Bank Secrecy Act, aimed at combating financial crime, to account for crypto innovation.
The reports do hold out hope that the digital-asset industry will foster financial innovation and potentially lead to new products and services that will lower the cost of payments and increase financial inclusion.
For instance, the Treasury Department’s study of a potential digitized dollar, to be issued by the Federal Reserve, reflects optimism that a central-bank digital currency could “contribute to a payment system that is more efficient, provide a foundation for further technological innovation and facilitate more efficient cross-border transactions.”