In the same way the pandemic accelerated adoption of new digital behaviors in retail (contactless shopping), medicine (telehealth) and education (Zoom), the Russian/ Ukraine war may accelerate U.S. adoption of cryptocurrency and digital assets. It may even lead to the creation of a digital U.S. currency.
Crypto has been on the frontlines of the battle between Russia and Ukraine. For the Russians it’s theoretically an easy way to hide wealth from sanctions (crypto-advocates say that can’t be done because the records stored on a public ledger, but I suspect it can). For Ukrainains it’s a way to get aid directly without laborious traditional money transfer delays. A summary of websites that report on crypto donations say that anywhere $100 million to $400 million worth of crypto has already been contributed to Ukraine.
The Biden Announcement
Is it serendipity or a shot of reality that on March 9th, shortly after the Russian invasion, the Biden administration decided to release its crypto plan? The administration announced the adoption of a government-wide approach to cryptocurrency and digital assets, calling for various government agencies and departments to step on the throttle to get regulatory guardrails in place.
In a field that’s usually filled with contention, the announcement for a coordinated crypto effort was welcomed by both crypto communities and financial institutions alike. As CoinDesk’s Nikhilesh De quipped, “A sitting U.S. president signed an executive order addressing the cryptocurrency industry. And no one hated it?”
In this interview on Coindesk, Kristen Smith, President of the Blockchain Association, one of the largest lobbying groups in the U.S., highlighted the importance of the announcements for two reasons. In Biden’s speech, said Smith, “The President called digital assets an opportunity for American leadership,” which he went on to say represented a marked differentiation from the last administration’s attitude toward crypto. “It also sets up a framework for policymakers to examine and learn about these issues,” she added.
“This is a watershed moment for crypto, digital assets, and Web 3, akin to the 1996/1997 whole of government wakeup to the commercial internet,” Jeremy Allaire, CEO of crypto firm Circle, wrote on Twitter. Faryar Shirzad, Coinbase’s chief policy officer, expressed “reasons for optimism” in a Twitter thread.
Many traditional financial players also praised the move. U.S. Treasury Secretary Janet Yellin, said “President Biden’s historic executive order calls for a coordinated and comprehensive approach to digital asset policy. This approach will support responsible innovation that could result in substantial benefits for the nation, consumers, and businesses. It will also address risks related to illicit finance, protecting consumers and investors, and preventing threats to the financial system and broader economy.”
Gary Gensler, chairman of the SEC, echoed the sentiment. “”I look forward to collaborating with colleagues across the government to achieve important public policy goals: protecting investors & consumers, guarding against illicit activity, & helping ensure financial stability,” Gensler said in a tweet.
True, it’s easier said than done, but Biden’s emphasis on coordination of efforts between U.S. departments and agencies should help unify today’s scattershot approach among the myriad agencies, many of whom currently have separate initiatives.
The order charges the agencies to formulate plans around six major areas: consumer protection, financial stability, illicit activity, U.S. competitiveness, financial inclusion and responsible innovation. There’s a good summary of the legal implications on each of the focus areas by JD Supra.
Timing is Everything
Crypto usage has exploded. Not only has it figured in the Ukraine/Russia war (see my previous column); various politicians are showing their enthusiasm, too. New York’s Mayor Adams is accepting his salary in crypto. Miami Mayor Francis Suarez is selling his city as a crypto hub. Wyoming welcomed crypto banks, and crypto friendly legislators there are declaring it the crypto capital of the country. More and more workers across multiple fieldare talking about wanting to get paid in crypto. Immediately following the Biden announcement, the price of Bitcoin rose from $31,000 to $42,000. (It has continued going up to a price of almost $45,000 at press time.)
Can our agencies move fast enough to ensure the U.S. stays in the running as a leader in digital assets? We know that planning for China’s digital yuan, for example, is already well underway and doesn’t need consensus from agencies to be adopted. Can the U.S. reconcile the energy-intensive mining of crypto to jive with its plans towards energy efficiency? [This will be one of the topics at next week’s Techonomy Climate conference in Mountain View.] Finally, at least we’re more or less all on the same page, with the pages turning more quickly.
Read the Executive Order.