The United States, under the leadership of President Joe Biden, has frankly stumbled on a huge opportunity with crypto. Being an emerging market technology that has solidified since the mid-2000s, one would think that the U.S. would be the leader in the field. However, thanks to a gut reaction to clamp down on a competition to traditional finance and fiat currency, the U.S. has instead practically handed leadership of the crypto market to anyone else in the world willing to take it.
Understanding Cryptocurrency:
Cryptocurrency, with its decentralized nature and underlying blockchain technology, offers the potential for secure transactions and financial inclusivity. However, it also presents challenges for regulatory authorities due to its borderless nature, anonymity, and potential for illicit activities. The Biden administration talks about a need to strike a delicate balance between fostering innovation and safeguarding the financial system, but in action the Administration has clearly favored traditional banks and moved to shut down free use of crypto or to make it so uncomfortable, no serious institution will touch it for mass adoption.
Regulatory Framework:
Joe Biden's approach to cryptocurrency regulation has focused a lot of talk about consumer protection and fostering innovation, but the emphasis has been on capturing taxation, national security, and perceived crime. The Administration has loudly expressed concerns about the use of cryptocurrencies in money laundering, terrorism financing, and other illicit activities, justifying ramping up of regulation and prosecution. And, there's no argument there have been plenty of examples that crime does exist (FTX, for example). Yet, to address these concerns, the Biden Administration has instead focused on a meat mallet approach to regulatory overreach, tax compliance, and enhanced transparency within the cryptocurrency ecosystem for the purposes of more overreach. In return, consumers get nothing as a benefit exception more frustration trying to use crypto at all.
Financial Stability:
No argument, the Administration's main concern regarding cryptocurrency lies in its potential impact on financial stability. Biden's team is keen on ensuring that the rapid growth of cryptocurrencies does not destabilize the existing financial system (translation - makes traditional banks useless and obsolete). The President has called for strengthened collaboration between regulatory agencies, such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), to monitor and regulate the crypto market effectively. Instead, these agencies aren't talking well to each other but are instead trying outdo each other with the next big prosecution. Their fundamental role of providing regulatory clarity is glaringly absent.
Taxation:
The Administration seeks to close loopholes and ensure that individuals and entities engaging in cryptocurrency transactions pay their fair share of taxes. In the proposed tax plan, the Biden Administration aims to increase the reporting requirements for cryptocurrency transactions and strengthen tax enforcement measures to prevent tax evasion. These measures are intended to provide clarity to individuals and businesses operating in the crypto space and create a level playing field with traditional financial assets. The turd in the punchbowl is that there won't be much in the way of anything to tax to the extent that the U.S. keeps aggressively shutting down exchanges and driving crypto business out of the U.S. When the biggest player in stateside-exchanges says they engaged in moving overseas thanks to the U.S. overrreach, that's a signal there's something very wrong with the current approach.
Central Bank Digital Currency (CBDC):
Another area of interest for the Biden Administration is the potential development of a Central Bank Digital Currency (CBDC). A CBDC would be a government-issued digital currency that would coexist with traditional forms of money. It also would put the banks in charge of crypto in the U.S. The Federal Reserve is exploring the benefits and risks associated with CBDCs. The objective is to leverage the advantages of blockchain technology while maintaining the stability and control associated with a centralized financial system. For the average user, however, it would likely result in very generic crypto offerings that provide nothing in the way of real income but give banks plenty of opportunities to create new fee revenue.
Engaging with Industry and Stakeholders:
The Administration has sought input from financial institutions, technology companies, and industry leaders to understand the potential benefits and risks of cryptocurrencies better. Then it ignored them with recent executive orders seeking ways to clamp down on crypto in general. Actions speak louder than empty words.
Conclusion:
Biden might have seemed like a better choice to some when elected, but he has proven to be a clear opponent to any technology that would potentially upset the traditional economic schema. In short, if crypto wants to see another growth boom, someone else needs to be in the White House next election. And I'm a Blue Dog Democrat writing this article.
