A recent NBC News poll found that 1 in 5 Americans have invested in, traded with, or used cryptocurrency, demonstrating their increased popularity. The highest share of people doing so is comprised of men between 18 and 49, with half of them saying that they have dabbled in cryptocurrencies. The poll also reflected that crypto was a preferred vehicle of investment for minority groups. 40% of Black Americans between the ages of 18 and 34 said that they have invested or traded in crypto.
Crypto advocates and supporters have long argued that cryptocurrencies offer faster transaction speeds, lower costs, better privacy and an excellent opportunity for unbanked communities to access financial services. The public seems to slowly understand these benefits and start capitalizing on the plethora of opportunities the crypto industry offers. This explains why the US Congress is ramping up its efforts to create a comprehensive regulatory framework for crypto.
Without regulation, the crypto industry looks like the 'Wild West', according to Gary Gensler, the Securities and Exchange Commission Chair. In a survey, only 19% of respondents said they viewed crypto positively, while 25% said they viewed crypto negatively. Most respondents (56%) are neutral or unsure about the crypto industry. And, while both Democrats and Republicans acknowledge the benefits of cryptocurrencies, they fear crypto scams and fraud make customers vulnerable.
Other Polls
The NBC News poll is not the first to quantify the number of Americans who have traded, bought, sold or used crypto assets. In 2018, Global Business Council and Survey Monkey conducted a survey with 5,761 participants in which 21% of participants were considering investing in cryptocurrency while 5% already had cryptocurrencies in their investment portfolio. Less than 20% of participants trust the government, while 25% trust the Bitcoin network. 28% of participants saw cryptocurrency as a store of value, while 63% viewed crypto as a growth investment.
Another study conducted by Nordvpn in February 2022 showed that 7 in 10 Americans, or 68% of participants, said they were aware of the risks of cryptocurrencies. Almost an equal number of participants had some understanding of what cryptocurrency is.
These polls demonstrate that the interest in cryptocurrencies is growing among Americans. While most have some knowledge about cryptocurrencies, there is a clear need for a regulatory framework for crypto to protect investors.
On 9 March 2022, President Joe Biden signed an executive order asking the government to examine the risks and benefits of cryptocurrencies. The executive order asks federal agencies to take a unified approach to the regulation of digital assets. The agencies have to focus on the following areas:
1. Consumer and investor protection
Consumer protection is an integral part of the executive order. There have been several scams and fraud where investors have lost millions of dollars. The Biden administration has instructed the Treasury Department to ensure sufficient oversight and safeguards against any financial risks posed by cryptocurrencies. Additionally, the Biden administration is keen to regulate stablecoins whose value is pegged to the US dollar. If handled properly, stablecoins can promote faster and more efficient payments. Congress wants to pass legislation that allows only insured banks to issue stablecoins. This move will give federal agencies greater jurisdiction over their operations, management and associated risks.
2. US position and competitiveness in global markets
The executive order focuses on leveraging digital assets to provide a competitive edge to the US over other countries. The Department of Commerce is being asked to establish a crypto framework that drives US leadership and competitiveness in harnessing the power of cryptocurrencies. The government is also seeking the support of several important players like Coinbase.
Additionally, the Biden administration wants to explore the possibility of a digital dollar. This is especially important because China has already launched its digital yuan. With its own central bank-backed digital currencies, China allows its citizens to make payments using their smartphones. Last year, the Federal Reserve issued its long-awaited report on virtual currencies, listing the pros and cons of digital assets. However, it did not say whether the US should issue its own digital dollar or not.
3. Illegal activities
This is one of the key focus areas of Biden’s executive order. He wants to eliminate illicit crypto activities in the industry. The President has asked federal agencies to coordinate, mitigating any financial and national security risks posed by digital assets. He wants all the major federal agencies, including the Federal Deposit Insurance Corp. and the Federal Reserve, to coordinate on the issue. Last month, the Department of Justice seized $3.6 billion worth of Bitcoin, which was stolen in 2016 when Bitfinex was hacked. The current value of the stolen cryptocurrency is around $4.5 billion.
Additionally, US regulators have expressed concerns over using cryptocurrencies by Russians to evade international sanctions. However, crypto exchanges have said that Russians cannot convert their funds into cryptocurrency since all transactions take place on a public ledger called the blockchain.
4. Climate Change and Responsible Innovation
Furthermore, the executive order focused on one of the critical issues associated with cryptocurrencies: climate change. Cryptocurrency mining involves using large amounts of energy to perform complex transactions. For Bitcoin mining, a mechanism called proof of work is employed that generates new cryptocurrencies by confirming transactions. This requires a lot of computing power as miners have to solve complicated puzzles to mine cryptocurrencies. The greater their computing power, the more chances the miners have to be rewarded in cryptocurrencies. The executive order asked the government to study how they can make cryptocurrency innovation more responsible by reducing its impact on the environment and climate change. China banned crypto mining last year to minimize cryptocurrency’s impact on the environment. This has led Chinese crypto miners to move to other countries, including the US.
As the interest in cryptocurrencies increases, the Biden administration is taking progressive steps to develop a framework for effectively regulating cryptocurrencies. This demonstrates a strong commitment to innovation and consumer protection and is a hopeful sign for the future of cryptocurrency.
