Following recent “anti-crypto” comments from prominent Democrats, the Biden administration has signaled that it intends to take a harsher regulatory stance on the nascent cryptocurrency industry.
In 2021, multiple Federal agencies commented on what they viewed as the growing threat that cryptocurrencies represented to the stability of the greater financial system.
In November of last year, Secretary of the Treasury Janet Yellen mentioned her concerns about stablecoins in a department press release.
“Stablecoins that are well-designed and subject to appropriate oversight have the potential to support beneficial payments options. But the absence of appropriate oversight presents risks to users and the broader system,” said Secretary Yellen. “Current oversight is inconsistent and fragmented, with some stablecoins effectively falling outside the regulatory perimeter. Treasury and the agencies involved in this report look forward to working with Members of Congress from both parties on this issue. While Congress considers action, regulators will continue to operate within their mandates to address the risks of these assets.”
Obviously believing that anti-crypto rhetoric could be a political asset within her left wing constituency, Sen. Elizabeth Warren was less measured as she piled on with a tweet: “Stablecoins pose risks to consumers & to our economy. They’re propping up one of the shadiest parts of the crypto world, DeFi, where consumers are least protected from getting scammed. Our regulators need to get serious about clamping down before it is too late.”
Statements such as these have created pressure on the Biden administration to take action, even as it’s clear that many politicians lack even a rudimentary understanding of the crypto markets. Blockworks and Bloomberg have recently reported that the administration is preparing to issue a crypto-related executive order in the coming months, possible as soon as February.
“Biden might use the power of the pen to appoint an individual crypto or digital assets Czar, having oversight power over a group of multiple partner agencies like the Commodity Futures Trading Commission, Financial Crimes Enforcement Network, the Office of the Comptroller of the Currency and the Securities and Exchange Commission,” said Michael Fasanello, director of training and regulatory affairs at Blockchain Intelligence Group. “All of the aforementioned agencies have some degree of interest in regulating the digital assets space.”
So will new regulatory action throw a bucket of cold water on a red-hot nascent industry? Or will it help to legitimize cryptocurrency markets in the minds of consumers and policymakers?
“I tend to think a bit of regulation will be a good thing for crypto, at least in its perception,” said Scott Hawksworth, the co-founder of Cryptogic. “But we’ll have to wait and see if they do it intelligently. Federal agencies don’t always have the best track record.”
In the meantime, crypto industry execs and founders wait for answers; 2022 is likely to bring more clarity, if not good news, to the future regulatory landscape.