The Biden Administration has posted an official blog detailing its roadmap to mitigate the risks of cryptocurrencies.
The roadmap starts by citing the 2022 implosion of LUNA/Terra and the subsequent catastrophic contagion within the industry that led to various bankruptcies. Included in this reference is the bankruptcy of FTX, saying that, “Many everyday investors who trusted cryptocurrency companies—including young people and people of color—suffered serious losses, but, thankfully, turmoil in the cryptocurrency markets has had little negative impact on the broader financial system to date.”
According to the roadmap, the Administration’s focus is on ensuring that cryptocurrencies cannot undermine financial stability, protecting investors and holding bad actors accountable. To achieve this, the roadmap states that experts across the administration have laid out a framework for developing digital assets in a safe and responsible way while addressing the risks they pose.
“At President Biden’s direction, we have spent the past year identifying the risks of cryptocurrencies and acting to mitigate them using the authorities that the Executive Branch has,” the roadmap reads.
It goes on to describe how some cryptocurrency entities ignore financial regulations and risk practices. Also alleged is that cryptocurrency platforms and promoters often mislead consumers, have conflicts of interest, fail to make adequate disclosures or commit outright fraud.
“Agencies are using their authorities to ramp up enforcement where appropriate and issue new guidance where needed,” the post reads. “The banking agencies issued joint guidance, just this month, on the imperative of separating risky digital assets from the banking system. Agencies across government have launched — or are now developing — public-awareness programs to help consumers understand the risks of buying cryptocurrencies.”
This, however, is not enough given the events of the last year, according to the roadmap. Therefore, the Administration will reveal priorities for further research devoted to digital assets and development, “which will help the technologies powering cryptocurrencies protect consumers by default.”
The post also details the Administrations’ belief that Congress needs to step up efforts by expanding regulators’ powers, strengthening transparency and disclosure requirements, funding greater law-enforcement capacity building and limiting cryptocurrencies’ risks to the financial system. It is careful to note that Congress should not greenlight mainstream institutions like pension funds to dive headlong into cryptocurrency markets as this would deepen the ties between cryptocurrencies and the broader financial system and increase systemic risks.
The roadmap is the latest in regards to Bitcoin regulation out of Washington, with the Biden Administration having released the “Executive Order on Ensuring Responsible Development of Digital Assets,” in March 2022 and the “Climate and Energy Implications of Crypto-Assets in the United States,” report in September 2022 respectively.