The Biden administration is planning to release an executive order that outlines the government’s cryptocurrency strategy.
Expected to be released in February, the order for federal agencies including the US Security and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) will outline the government’s plan to regulate digital assets, directing the agencies to determine their risks and opportunities, Bloomberg reports.
Avivah Litan, distinguished VP analyst at Gartner told Digital Nation that the Biden administration is “seeking to coordinate the different U.S. agencies’ responses.”
The impending executive order comes as the SEC has announced a significant proposal to tighten regulation on cryptocurrencies.
The proposal has widened the definition of securities exchanges to include a range of decentralised finance (DeFi) protocols. They would then be required to register as exchanges or broker-dealers and comply with alternative trading system (ATS) regulation.
Litan said that the impact of the proposal will largely be to push companies innovating in blockchain offshore.
“You can't arrest the smart contract. And the founders of the organisations that manage these protocols — because they're not really totally decentralised, they are managed by centralised companies — they could be found guilty of not abiding by the regulation, but then they could just leave the US too.”
According to Litan, the most challenging element of the Amendment is the narrow 30 day comment period.
“It's just impossible to do all this, to comment in 30 days. And it really reminds me of what Mnuchin tried to do, Secretary Mnuchin, who worked for Trump, as Treasury Secretary. He tried to put in these rules right before he left office called the “Midnight rule’, where it was going to really expand regulation of who needs to comply with cryptocurrency regulation,” said Litan.
“The only difference is that was done right before Christmas, and then they left office, so it kind of got put on hold. This one at least it's not right before a big holiday, but it's just amazing that they would give a 30 day period to limit comments to 30 days on such a significant piece of regulation that you probably need two months to read.”
Commissioner Hester M. Pierce released a dissenting statement on the proposal to amend Regulation ATS stating that while the markets are in need of reform, they require “careful consideration”.
“I cannot comprehend why we insist on blindfolding ourselves, rather than embracing the notice-and-comment process that has been so valuable in unearthing issues for our consideration. Our self-imposed unrealistic time constraint will prevent us from thinking seriously about the possible effects —intended and otherwise — of our rules by refusing to give the public sufficient time to provide us with informed comment,” said Pierce.
“We face no emergency in these markets that compels us to limit comments to 30 days; indeed, the Commission’s precipitous rush to plow through the comment period — almost as if it were a mere formality in our process — presents a greater immediate risk to the market than any of the issues that have led to this recommendation.”