WASHINGTON — President Biden will sign an executive order on Wednesday directing agencies across the federal government to study the potential risks posed by the explosion in the popularity of cryptocurrencies and to consider creating a US digital currency.
The executive order will urge federal regulators to review the risks that a $1.75 trillion crypto market poses to consumers, investors, and the broader economy. A senior administration official said federal agencies will have several months to prepare a report of their findings, which will then inform about any new regulatory actions the White House takes.
About 16% of American adults, or roughly 40 million people, have invested, traded or used cryptocurrency, according to the White House fact sheet. This growing proliferation of digital assets, which include volatile cryptocurrencies such as bitcoin and so-called stablecoins linked to assets such as the US dollar, has prompted the Biden administration to focus its work on this topic. White House officials have been working with crypto industry experts for several months to prepare the executive order.
“This is not a niche issue anymore, and it is extremely important that we have the right tools in place to mitigate risks to consumers, investors, and frankly the entire financial system,” said a senior administration official.
The dollar value of bitcoin has jumped more than 9% from the level of 5 p.m. ET Tuesday to $4,2118.73 on Wednesday, according to CoinDesk. Most of the rally came before the official announcement of the White House plans, after the Treasury mistakenly published a statement about the executive order from Treasury Secretary Janet Yellen.
Ms Yellen said the President’s order will support responsible innovation in digital assets while addressing risks related to illicit financing. A Treasury spokeswoman said the statement was deleted after it was posted in error, and was republished later Wednesday morning.
Chris Bendixen, head of research at the London-based asset management firm, said concerns about stricter regulation may have affected the value of bitcoin.
“There could be this growing fear of some negative action by the US government,” he said.
A senior administration official said that under the executive order, the Biden administration will scrutinize how cryptocurrencies are undermining US sanctions and anti-money laundering efforts. These concerns have escalated with the United States imposing sanctions on Russia in response Invasion of Ukraine. The administration will also study the impact of energy-intensive crypto mining on the climate.
The Biden administration will also formally consider creating a potential US digital currency, a cryptocurrency backed by the Federal Reserve, according to the White House fact sheet. The Federal Reserve is already assessing the possibility of digital currency, which has already been adopted by some other countries, including China. A person familiar with the matter said that the executive order would ask the Department of Justice to consider whether Congress would need to authorize the creation of a digital currency.
While it is in many ways an initial, extensive review, the White House executive order opens the door to more substantive federal regulation in a sector that agencies have largely bypassed or tapped into.
—Caitlin Ostrov contributed to this article.
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