Headline: Decrypting the words
Date: 3/9/2022
Body: OK, deep breath, because news of all types is coming at us right, left and center. One of the top stories today. In the midst of news of very real violence in Europe, there is a pretty significant thing happening at home. Just today, President Biden signed an Executive Order to investigate the possibility of having an official U.S. digital currency. Brian Deese, the director of the National Economic Council, and Jake Sullivan, the president’s national security adviser, said in a statement that the order “will help position the U.S. to keep playing a leading role in the innovation and governance of the digital assets ecosystem at home and abroad, in a way that protects consumers, is consistent with our democratic values and advances U.S. global competitiveness.” This seems to be the way to say, it’s about time.
Is digital currency really a big deal?
Yes. The value of digital assets has risen above $3 Trillion, up from $14 Billion just 5 years ago. This is the main impetus for the Executive Order.
What is the sequence of events that led to this Order?
In January, the Fed released a long-awaited report on central bank digital currencies. Per the government, this report was meant to generate comment and conversation. On Wednesday, after news of the executive order, the Fed’s official Twitter account noted that it had “made no decisions on whether to pursue or implement a central bank digital currency” and invited the public to continue commenting on issues raised by its report. The Chairman of the Federal Reserve commented that with such a digital currency, the stablecoins might be deemed less relevant. Others are also weighing in on this topic, such as the Secretary of the Treasury, Janet Yellen. “As we take on this important work, we’ll be guided by consumer and investor protection groups, market participants, and other leading experts,” She went on to say, “Treasury will work to promote a fairer, more inclusive, and more efficient financial system, while building on our ongoing work to counter illicit finance, and prevent risks to financial stability and national security.”
The EO is produced at an instance of escalated national security concerns. Chief among them is the question of whether or not Russia will utilize these cryptocurrencies to launder money and disguise the source of funds. (They might want to do this if they are cut off from Western finance systems. Spoiler alert: They were.). A senior administration official claimed that work on it had predated the Ukraine war.President Biden’s order sets an 180-day deadline for the reports to be prepared.
What did the EO specifically setup into action?
Specifically, the Executive Order calls for measures to:
- Instructs the Treasury Department (and partners) to develop a protocol for dealing with digital assets and cryptocurrency and render recommendations.
- Directs agencies to work with international partners to develop an internationally cohesive approach to cryptocurrency.
- Produce a report on how technological solutions can be harnessed to better serve underbanked populations.
- Directs the Federal Reserve to continue researching the feasibility of a U.S. Central Bank Digital Currency.Commodity Futures Trading Commission Chairman Rostin Behnam has also urged Congress to give his agency a leading role in regulating digital assets.
The Verdict
Eswar Prasad, a professor of trade policy at Cornell University and the author of a book called “The Future of Money,” said the order would put the United States in “pole position” to set global standards and move closer to what he said was “the inevitable digitization of the world’s pre-eminent currency.” So, I guess that the good old Greenback was always destined to be replaced by the good new Screenback. Whatever happens with the digital currency of the United States, it will be interesting to watch.
REFERENCES
https://www.washingtonpost.com/business/2022/03/09/biden-crypto-executive-order/
Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice. Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.