An Executive Order on Crypto

Ben B&W
Ben Viagas
Last Update 03/09/2022

Before we dive in, let’s start with what the executive order does and does not do. At a high level, it: 

  • Does not take any direct action to ban or curtail the use of crypto
  • Does not establish any government bodies
  • Does not formally institute a Central Bank Digital Currency
  • Does acknowledge that crypto is tied to U.S. financial and technological leadership
  • Does acknowledge the potential for crypto to provide access to financial services for underserved communities
  • Does broadly direct the U.S. Government to support technological advances in digital currencies, and continue research into a Central Bank Digital Currency

The White House issued a highly anticipated executive order today laying out the U.S. policy for digital assets. It identifies six key priorities focused on American competitiveness, central bank digital currencies (CBDCs), and proactive legislation. Overall, it is a positive and balanced statement from the White House demonstrating a thoughtful approach to integrating crypto into the U.S. economy. 

The executive order takes an optimistic tone by acknowledging the massive growth of digital asset markets, with three notable stats: 

  • Digital asset market capitalization grew from $14 billion to $3 trillion in five years
  • 16% of American adults or 40 million people have invested in cryptocurrencies
  • Over 100 countries are exploring Central Bank Digital Currencies (CBDCs)

It frames the opportunity created by the emerging digital asset market as an opportunity to reinforce American leadership in the global financial system and technological industry. Simply put, the most powerful economy in the world is acknowledging crypto as a growing industry crucial to maintaining U.S. global competitiveness.

American Competitiveness

The U.S. is a global leader in legacy finance and technology; the ancestors of the digital asset industry. However, despite gradual progress, regulatory uncertainty has led many companies to build crypto ventures abroad. Countries, like Portugal and Singapore, are capitalizing on this uncertainty by offering tax breaks, regulatory clarity, and other incentives. In seeking to prevent the U.S. from losing talent and capital, the executive order is a positive sign for the industry as a whole. 

Central Bank Digital Currencies (CBDCs)

While we’ve already seen interest in a CBDC from the executive branch, notably in a white paper from the Federal Reserve earlier this year, in this executive order research and development of a United States CBDC is encouraged with “the highest urgency.” A U.S. CBDC would be a big step in the advancement of crypto as a mainstream technology, and could help maintain the dollar as the world reserve currency. The response to Russia’s invasion of Ukraine has demonstrated the importance of financial sanctions as a tool in international affairs. With over 100 countries piloting or exploring CBDCs, the U.S. has the opportunity to maintain its position as a global leader in finance by developing smartly crafted policies and regulations.

Proactive Legislation

Here there is a clear focus on investor protections, privacy, and limiting structural risks to the financial system. Policymakers have a difficult job ensuring innovation and technological advancements thrive. On one hand, poorly designed regulations can stifle future innovation – or push development of these technologies offshore. On the other hand, a complete lack of regulatory clarity threatens to undermine the existing regulatory frameworks governing the traditional financial markets that have been developed and refined over decades.

At Grayscale, we continue to have positive engagements with regulators to convert our flagship product, Grayscale Bitcoin Trust (GBTC), into an ETF. Seeing the government take a more proactive approach with the growth and regulation of the digital asset sector in the U.S. is refreshing, and a clear acknowledgement of the hundreds of thousands of investors looking to embrace crypto and web 3.0 in U.S. markets. 

While no direct action has been taken yet, agencies have 120 – 210 days to establish a framework for each of the key areas of focus. We will look for these reports with great interest. Despite the lack of action, there is now more clarity in the White House’s sentiment towards digital assets. In general, we believe the executive order is optimistic for crypto growth in the U.S., with the government recognizing that the emerging digital asset industry is important to maintaining global competitiveness in finance and technology.

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