Cryptocurrencies like Bitcoin and Ethereum continue to be a hot commodity. Between 2016 and November 2021, the total market capitalization of the sector rose from $14 billion to $3 trillion, and roughly 40 million Americans or 16% of the total US population have traded, invested, or used cryptocurrency.
As the blockchain (the underlying technology of cryptocurrencies) is applied to more and more areas, digital assets, NFTs (non-fungible tokens), stablecoins, and digital currencies will continue to grow as well.
Unfortunately, the sector is also notoriously volatile, and the lack of regulation has left it an easy target for scammers and grifters, including ransomware attacks, which have increased in frequency and dollar value. Regulation is coming to the industry, but what and when remains to be seen.
In a major step toward such regulation, on March 9, 2022, President Biden issued the first ever executive order on digital assets and cryptocurrencies. Without stating any specific policies or regulations, the EO urges federal agencies to continue to work on developing thoughtful regulations for the crypto industry around six areas: 1) consumer and investor protection, 2) financial stability, 3) illicit finance, 4) U.S. leadership in the global financial system and economic competitiveness, 5) financial inclusion, and 6) responsible innovation.
Why Issue The Executive Order?
The fact that President Biden thought it necessary to issue such an EO is seen by many as an important acknowledgment of the power of cryptocurrencies. Whatever one’s personal feelings on cryptocurrencies, these technologies have profound implications across our society on:
the protection of consumers, investors, and businesses, including data privacy and security; financial stability and systemic risk; crime; national security; the ability to exercise human rights; financial inclusion and equity; and energy demand and climate change.
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The Biden administration is refusing to ignore the technology and its potential advantages and hazards. Instead, it wants to ensure the US is a leader in the arena and that the industry is safe for American consumers.
What’s In The Executive Order?
Biden’s executive order calls for a “whole-of-government” approach to assessing the benefits, harms, and future of cryptocurrencies and digital assets. The EO identifies six top regulatory priorities and directs various federal agencies to collaborate on addressing them:
- Protect U.S. Consumers, Investors, and Businesses,
- Protect U.S. and Global Financial Stability and Mitigate Systemic Risk,
- Mitigate the Illicit Finance and National Security Risks Posed by the Illicit Use of Digital Assets,
- Promote U.S. Leadership in Technology and Economic Competitiveness to Reinforce U.S. Leadership in the Global Financial System,
- Promote Equitable Access to Safe and Affordable Financial Services, and
- Support Technological Advances and Ensure Responsible Development and Use of Digital Assets.
This isn’t entirely uncharted territory. There have been some regulations passed previously. The Infrastructure Investment and Jobs Act, which went into effect on January 1, 2022, created new crypto asset reporting requirements and updated various definitions of critical digital asset–related concepts. But further regulations will likely come as the United States navigates this complex, volatile, and important sector.
Fortunately, the crypto industry itself seems receptive to thoughtful regulations, especially as the downsides of decentralized digital currencies continue to manifest themselves (e.g. ransomware attacks, evasion of financial sanctions, etc.)
Importantly, the growing popularity of cryptocurrencies means that these digital assets will constitute ever-larger percentages of the value of estates. Since the regulatory framework will evolve, it’s especially important to incorporate cryptocurrencies and digital assets into your estate plan.
Read More: Estate Planning for Cryptocurrencies and Digital Assets
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