President Joe Biden signed an executive order on Wednesday calling on the government to examine the risks and benefits of cryptocurrencies.
It is a long-awaited directive that has had the industry on edge, not least due to growing regulatory concern around the world surrounding the digital asset market.
There were reports of a divide between the White House and the Treasury Secretary.
The executive order was accidentally put out by the Treasury and the market got wind of it.
The order was signed on Wednesday. According to a White House fact sheet, federal agencies should take a unified approach to regulation and oversight of digital assets.
The key things to know are listed.
Six key areas will be the focus of the measures announced Wednesday.
The directive protects consumers. There have been many stories of investors falling for scam or losing huge sums of money through cyberattacks.
The Treasury is being asked to assess and develop policy recommendations oncryptocurrencies. Ensuring sufficient oversight and safeguard against any systemic financial risks posed by digital assets is what it wants regulators to do.
policymakers have been careful to downplay the risks of the new technology, but there have been increasing concerns over the role played by stable coins. The digital token is meant to be pegged to the value of the U.S. dollar.
The world's largest stable coin has attracted the ire of regulators over claims that its token is not sufficiently backed by dollars held in reserve. The make-up of the reserves includes short-term debt obligations like commercial paper, not just cash.
The topic of stable coins was not mentioned in the White House announcement Wednesday, despite the fact that Yellen wants Congress to regulate the sector.
Biden's executive order focuses on rooting out illegal activity in the space.
The president has called for an unprecedented focus of coordinated action from federal agencies to mitigate the risks posed by cryptocurrencies. He wants international collaboration on the issue.
The biggest seizure of cryptocurrencies ever was related to the 2016 hack of Bitfinex.
Following Russia's invasion of Ukraine, authorities are concerned about the possible use of virtual currency to help Russians evade sanctions.
It is difficult for funds to be laundered through digital currency, as all transactions are kept public on an un changeable record-keeping system, according to proponents of the technology.
Biden also dropped a mention of the sheer energy cost baked into digital currencies. He wants the government to study ways to make innovation more responsible.
Proof of work is a mechanism used to confirm transactions and generate new units of currency. A network of computers compete to solve math puzzles in order to mine thecryptocurrencies. The more computing power a miner has, the more likely they are to be rewarded with new bitcoins.
China banned allcryptocurrencies completely last year, raising alarm bells for policymakers around the world. The country's move led to an exodus of miners to the US and other countries.
The White House wants to give the US a competitive edge over other countries when it comes to the development of cryptocurrencies. China has effectively banned cryptocurrencies.
The Department of Commerce has been tasked by Biden to establish a framework to drive U.S. competitiveness and leadership in digital asset technologies.
Several figures in the industry have called for such action.
Biden has the opportunity to ensure America remains the global leader for technological innovation for years to come, according to the Blockchain Association.
The Biden administration wants to explore a digital version of the dollar.
China has led the charge toward central bank digital currencies, orCBDCs, with more and more people using smartphones to make payments and handle their finances.
Biden isn't saying if the U.S. should launch its own currency. He wants the government to placeurgency on research and development of a potentialCBDC.
Last year, the Federal Reserve began exploring the issue of a digital dollar. The central bank released a long-awaited report detailing the pros and cons of virtual money, but didn't take a position on whether the U.S. should issue one.
Policymakers are looking at a number of issues around financial stability and privacy, which could be mitigated by the rapid settlement of payments.
Delivery of the new policy agenda removes a key source of uncertainty for an industry that has already been ravaged by regulatory scandals.
The US Securities and Exchange Commission hit BlockFi with a record $50 million fine for violating securities laws with its retail lending product. The settlement included payments to 32 states.
The watchdog had trouble with the company, but it was not punished. The SEC threatened to take legal action over a product similar to BlockFi, which offered users interest payments on their holdings. Plans for the service were dropped by the company.
Jeremy Allaire, CEO of Circle, said that this is a "watershed moment" for digital assets and the internet.
The investors seemed to agree. The price of the virtual currency surged above $42,000 on Wednesday.
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