WASHINGTON — President Biden will sign an executive order Wednesday directing federal government agencies to examine the risks posed by the explosion of cryptocurrencies and consider creating a U.S. digital currency.
The executive order will call on federal regulators to reassess the risks that the roughly $1.75 trillion cryptocurrency market poses to consumers, investors, and the broader economy. Federal agencies will have several months to prepare a report with their findings, which will then inform any new regulatory action taken by the White House, a senior administration official said.
According to a White House fact sheet, about 16% of American adults, or roughly 40 million people, have invested, traded or used cryptocurrencies. The growing proliferation of digital assets, including volatile cryptocurrencies like bitcoin and so-called stablecoins pegged to assets like the US dollar, pushed the Biden administration to centralize its work on the topic. White House officials have been working with the crypto industry and experts for several months to prepare the executive order.
“This is no longer a narrowly focused issue and it is critical that we have the right tools in place to mitigate risk for consumers and investors and, frankly, for the entire financial system,” a senior administration official said.
The dollar value of bitcoin jumped more than 9% from its 5 p.m. ET level on Tuesday to $42,118.73 on Wednesday, according to CoinDesk. Much of the upsurge occurred before the official announcement of the White House plans after the Treasury Department accidentally released a statement about an executive order from Treasury Secretary Janet Yellen.
Ms. Yellen said the executive order will support responsible innovation in digital assets while also eliminating the risks associated with illicit funding. The statement was removed after it was published in error, a Treasury spokeswoman said, and was later released on Wednesday morning.
Fears of more regulation may have weighed on bitcoin’s value, said Chris Bendiksen, head of research at London-based asset management firm CoinShares.
“Perhaps it was an obsessive fear of some negative action by the US government,” he said.
Under the executive order, the Biden administration will scrutinize how cryptocurrencies could undermine U.S. sanctions and anti-money laundering efforts, according to a senior administration official. These fears have intensified since the United States imposed sanctions on Russia in response to its invasion of Ukraine. The administration will also examine the impact of energy-intensive cryptocurrency mining on the climate.
According to a White House fact sheet, the Biden administration will also formally consider creating a U.S. digital currency, a Federal Reserve-backed cryptocurrency. The Federal Reserve is already evaluating the possibility of a digital currency, which some other countries have already adopted, including China. A source familiar with the matter said the executive order would ask the Justice Department to look into whether Congress needs to authorize the creation of a digital currency.
While much of the White House’s executive order represents a broad initial review, it opens the door for more substantial federal regulation in a sector that agencies have previously largely bypassed or dealt with piecemeal.
— Caitlin Ostroff contributed to this article.
Write to Andrew Duehren, [email protected]
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