US president Joe Biden signed an executive order last Wednesday relating to cryptocurrencies. To what extent Biden himself is concerned with crypto is unknown, but nonetheless, a document was given the official scrawl and is now in play.
This news was greeted as a matter of importance by the crypto community, and the price of bitcoin temporarily pumped. Actually, the pump was a little earlier, triggered by a statement released, and then removed, by Treasury Secretary Janet Yellen, indicating that the order would be positive for crypto, or at least, not negative.
If you’re wondering where that pump has now gone, by the way, it got sold off, in true sideways, crab market fashion.
But, what of the order itself? It's not overly long, and remains a little vague throughout, but here’s how it comes across.
The Good
What’s primarily encouraging about the executive order is simply that it exists at all. For over a decade, naysayers have insisted that crypto is irrelevant, no matter how apparent it became, to those who looked into it, that something extremely interesting was taking place.
And, so the mere fact that an executive order about crypto has been created acknowledges that, yes, cryptocurrencies are really happening. Bitcoin is here to stay, as is the wider, ever-expanding crypto ecosystem, and here’s the thing: it matters.
Of course, the other key factor is that as well as simply having been deemed necessary, the executive order is not hostile towards crypto. The overall tone is neutral, but also curious and open. There’s no paranoia, no over-egging of perceived threats, and no suggestion of drastic, draconian measures, a la China. In fact, it’s an altogether FUD-free document.
With plans for an even-handed, broad assessment of crypto, what the order does is tip an affirmative nod towards any conservative investors who might have been waiting on the sidelines.
In particular, the order is concerned with ensuring that investors have some kinds of protection, and that criminal activity is addressed. Now, if you’re of a wild west mindset, you might have some questions about that, and point out that reassurances should be inherent in the networks themselves.
However, even a minor degree of interest from a US government in investor protection may have a positive effect on public perceptions of Bitcoin and crypto, and on institutional risk assessments.
The Bad
The executive order contains a lot of focus on CBDCs (Central Bank Digital Currencies). Bearing in mind that some fundamental raisons d’etre of Bitcoin (and Ethereum, alternative Layer 1s and web3) are decentralization, self-sovereignty and trustless peer-to-peer transactions, CBDCs are anathema to those who subscribe to crypto as a transformative enterprise.
There are plenty of arguments against CBDCs, not least of which is that they are a significant step away from the financial freedom and economic uncoupling from the state offered by Bitcoin, and that they have the capacity to be wielded in an authoritarian fashion.
Don’t forget that a CBDC can be created as programmable money with no privacy. If that sounds ok to you, because you happen to like the people currently in charge, then imagine instead the politician with whom you have the least common ground, or a political party you actively distrust. And, now imagine that they can directly program your spending.
That said though, the order only instructs that the potential creation of a CBDC should be evaluated, which is still a long way from such an instrument actually coming to pass in the United States. And, besides which, in a world where there is, in one corner, centralized CBDCs granting the potential for extraordinary government overreach, and in the opposite corner, Bitcoin, then my money is on Bitcoin, so to speak.
The Not Much
As outlined, the existence of a non-hostile executive order on cryptocurrencies is in itself notable. And, at the same time, the emphasis placed on CBDCs is a matter of concern.
But, there are elements of the order that are nothing much at all. There is mention of ‘financial inclusion’ and ‘equity’, but financial inclusion is inherent within crypto, and it shouldn't take long to discover that being open to all and allowing people to transact on their terms are integral to what's unfolding.
And, as for equity, make of that what you will. If it had real meaning, it would run counter to the free market ethos (since equity tends to equate with bureaucratic interference), but in our current era, it’s often not much more than an empty political buzzword.
The other factor that might lead one to conclude that the order isn’t quite that much of a big deal, is that the US government is only addressing cryptocurrencies because cryptocurrencies have bootstrapped themselves into a position where governments can no longer ignore them. In other words, it’s crypto, not the government, that is on the front foot.
Crypto momentum has been building for over a decade, despite (or because of) crypto operating almost totally outside of any zones controlled by the authorities. Although this executive order has been largely welcomed, perhaps what it really indicates is that establishment figures just recently noticed what a lot of people already knew: change is coming.
