Cryptocurrency: the US tries to legitimize it
The latest White House development in cryptocurrencies, Executive Order (EO)on Ensuring Responsible Development of Digital Assets, is geared towards bringing the world of blockchain in general, and cryptocurrencies in particular, into the mainstream. Note that cryptocurrencies make up a $3 trillion dollar ecosystem
The EO sets into motion a series of activities to ensure
Cryptocurrencies are safe,
Ensure financial stability
Are not used for illegal activities,
Availability to the underbanked and the underprivileged.
We have heard of billions of dollars of losses incurred by cryptocurrency customers and exchanges. The current cryptocurrency ecosystem does not protect consumers, investors, or businesses. There is only one requirement that the US Government has pushed through, Know Your Customer (KYC), that is applicable to cryptocurrency exchanges. Otherwise, there is nothing to protect the exchange or the client.
The EO would like to put in sufficient oversights and standards to protect the financial data, custodial services, disclosures, and privacy.
Ensure Financial Stability
Protect the $ or the national currency of your choice. Assume we come up with a new cryptocurrency, X. Everyone loves X. They use X for everything. Soon, everyone uses X, saves X, gets paid in X. Such a move will create trouble for sovereign currencies. The United States Central Bank Digital Currencies is being looked at.
The EO wants to make sure the $ stays strong.
Cryptocurrencies are pseudo-anonymous. That is, the IRS will ultimately catch you if it is important enough. Currently, apart from a measly KYC, there is nothing in place to stop ransomware payments, drug deals, financing of terrorist activities, tax evasion, etc.
The EO wants to put a stop to illegal activities and the taxman wants to get his cut.
Instead of blocking cryptocurrencies, the EO wants to encourage innovation. Many different financial, as well as other digital assets innovations, are coming to the fore. The EO wants to ensure privacy and security, prevent cybercrimes, including cyber-hacking, ransomware, wash trades, national security, etc.
The EO wants to make sure the US leads in innovation and doesn't get left behind.
Currently, cryptocurrencies are for the few. Given the inherent low cost of Decentralized Financing, Digital payments, cross-border payments, etc. are fast and low-cost.
Coordination and Action Items
Many agencies going to get involved. We have to see if this will work or become a circus. The Assistant to the President for National Security Affairs (APNSA) and the Assistant to the President for Economic Policy (APEP) will lead the charge.
There is, however, a detailed timetable of actions that have to be taken.
It seems that the giant has woken up.