According to Bloomberg, President Biden plans to announce an executive order this week that will outline the federal government's strategy for reviewing cryptocurrencies.
Citing people familiar with the administration's plans, Bloomberg said the order would instruct federal agencies to investigate potential regulatory changes and then report them to the White House later this year. According to Bloomberg, the order is expected to address the potential for a US central bank digital currency, or CBDC, and to play a regulatory role for individual agencies, including state and commerce departments.
According to Reuters, the executive order, in development from last year, could be issued as early as Wednesday.
Biden's order comes amid debate over whether crypto has been a net positive or a negative during Russia's invasion of Ukraine. Some Democratic legislators, including Senator Elizabeth Warren of Massachusetts, Ron Wyden of Oregon and Sherrod Brown of Ohio, have advocated for greater regulation of the crypto sector. Warren and Brown joined two other Democratic aides last week by sending a letter to Treasury Secretary Janet Yellen expressing concerns about the cryptocurrency's potential use to evade sanctions.
On the trading side, leaders of crypto exchanges such as Binance and Coinbase have resisted calls by Ukrainian authorities and Western politicians to unilaterally ban Russian users of their platforms. Coinbase CEO Brian Armstrong said in a tweet last week that crypto is acting as a "lifeline" for Russian users, who are now facing the consequences of a crumbling ruble and increased sanctions.
Although Biden's executive order is the latest development in the conflict between the crypto sector and regulators, it is hardly the beginning of the battle. Last year, Securities and Exchange Commission Chairman Gary Gensler referred to the crypto market as the "Wild West," and "ribbed with fraud, scam, and abuse." Gensler made clear his intentions to increase regulation in the crypto sector. have been given.
Still, the increased regulations will come at the expense of crypto companies, said Amy Lynch, a former SEC regulator and president of regulatory compliance consulting firm Frontline Compliance.
Because the new rules will create additional work for crypto companies, they will need to hire more employees, potentially pay to register their business with the government, and pay lawyers to ensure that they follow the law.
"It will probably be the biggest hit to their bottom line, just building and maintaining a new department," Lynch told Fortune.
The increased regulations could also hurt innovation and increase pressure for crypto companies to move overseas, according to George Pesok, general counsel and chief compliance officer at Taken, a US-based compliance software developer for the cryptocurrency space.
"The cost is important not only from a monetary standpoint, but also from a leadership perspective and America's standing in the world," Pesok told Fortune. “We cannot give up our leadership role in this industry. It would be bad for everyone."
On the other hand, regulations can help consumers by protecting them from con artists and fraud. Last year, scammers made around $14 billion from crypto-related crimes.
Additionally, by actively moving forward, regulators are trying to avoid crypto becoming a catalyst for a macroeconomic crash, such as the role of bad mortgages in the 2008 recession, Lynch said.
“They don’t want to see another financial crisis, like the one in 2008, caused by cryptocurrency and the lack of regulation surrounding it,” she said.