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The Biden administration is rushing to get a handle on the fast-growing cryptocurrency market after extreme volatility has hit the price of bitcoin, ethereum and collectible non-fungible tokens (NFTs).
Bitcoin, ethereum and NFT prices have swung wildly over the last year, with the bitcoin price soaring to almost $70,000 per bitcoin late last year before crashing back to around $37,000. Ethereum, the second-largest cryptocurrency after bitcoin, has seen similar swings while the NFT market grew from barely anything to a staggering $41 billion in 2021.
Now, the Biden administration is gearing up to issue an executive order that will call on federal agencies to regulate digital assets such as bitcoin, ethereum and NFTs “as a matter of national security,” it’s been reported.
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“This is designed to look holistically at digital assets and develop a set of policies that give coherency to what the government is trying to do in this space,” a person familiar with the White House’s plan told Barron’s, indicating the White House National Security Council, the State Department, Treasury Department, National Economic Council, and Council of Economic Advisers would all be involved.
“Because digital assets don’t stay in one country, it’s necessary to work with other countries on synchronization,” the person added.
The bitcoin and crypto market has ballooned from $200 billion in January 2020 to over $1.5 trillion today as people around the world buy into cryptocurrencies as potentially the future of finance. Meanwhile, NFTs—digital certificates largely built on the ethereum blockchain—have been adopted by the worlds of art and sport as a lucrative new revenue stream.
Technology giant interest including from the likes of Facebook’s Meta and iPhone-maker Apple in developing virtual reality worlds that have become known as metaverses has also led to speculation blockchain-based scarce digital assets such as bitcoin, ethereum and NFTs could form the foundations of such worlds.
The pace and scale of bitcoin, ethereum and NFT adoption has taken some by surprise, with some warning they could now pose a risk to the global financial system as nation-states begin to experiment with digital assets. El Salvador became the world’s first country to adopt bitcoin as legal tender in September and began buying up bitcoins.
Earlier this month, reports emerged the White House is gearing up to issue a cryptocurrency executive order—with president Joe Biden reportedly set to ask federal agencies to determine crypto risks and opportunities.
The executive order, which could be signed by Biden as soon as next month, would “put the White House at the center of Washington’s efforts to deal with cryptocurrencies,” it was reported by Bloomberg, citing anonymous sources familiar with the matter.
Other countries are also looking to rein in the bitcoin and crypto market, with some considering following China in issuing a blanket crypto ban. The U.S. is now home to more so-called bitcoin miners—those that create new bitcoins using huge amounts of energy—than any other country since China’s ban last year.
“We need to regulate, not ban,” a senior Russian official said this week after the country’s central bank recommended an outright bitcoin and crypto ban. President Vladimir Putin has signaled his support for proposals that would promote taxed and regulated crypto mining in the country.
In the U.K., a former health minister has warned “Britain will be left in the dust with [its] tepid attitude to cryptocurrencies,” while a former finance minister who’s now a senior adviser to a London-based institutional crypto exchange has said it’s “frankly quite shocking” that the U.K. has fallen behind other finance hubs in setting clear regulation on the burgeoning crypto industry.
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“Two rival world powers, the U.S. and Russia, are both now seemingly scrambling to beat each other in the move towards accepting and regulating bitcoin and cryptocurrencies at a federal level,” Nigel Green, the chief executive of financial advisory group deVere, wrote in emailed comments.
“Whilst they remain fundamentally politically and ideologically opposed, both Washington and Moscow appear to be coming to the same consensus that in a digital age, traditional fiat currencies are on borrowed time and have been for a while.”
Earlier this month, Wall Street giant Fidelity advised countries to follow El Salvador in buying bitcoin—predicting those that buy bitcoin while the price is low “will be better off competitively than their peers.”
“Despite currently having the world’s reserve currency, it seems the U.S. knows the future is inevitably digital,” Green added. “This would explain why Biden is rushing a directive that would place the White House in a central role overseeing plans to set policies and regulate digital assets.”
Late last year, Hillary Clinton, the former U.S. presidential hopeful and secretary of state under president Barack Obama, warned the rise of bitcoin and cryptocurrencies could undermine the U.S. dollar’s reserve currency status.