Maybe Brian Armstrong is going to get his wish after all.
The Coinbase CEO called on Congress to create a new agency to oversee crypto late last year, an idea that was panned in the industry and is unlikely to be embraced by the three regulatory agencies angling for control.
Read more: Coinbase Asks Congress to Create Crypto-Regulator
Rather than choose between the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the Office of the Comptroller of the Currency (OCC), the White House is taking control for the moment.
Bloomberg reported Monday (Jan. 24) that President Joe Biden plans to issue an executive order as soon as February that would reveal the outlines of a national strategy on cryptocurrencies. Still, it will be far from final as it will require a broad spectrum of government agencies to provide input by the second half of 2022.
See also: Biden Administration to Release Order on Crypto
That much at least has been welcomed, as the industry has been calling for regulatory clarity for years on issues ranging from when cryptocurrencies are securities to tax issues. And it’s not just crypto that’s interested.
While nothing in the Biden order is said to suggest a single regulator, it broadened the field of input beyond the SEC, CFTC and OCC to include agencies ranging from the State Department to the Department of Commerce.
All three of those agencies have been angling for control, with new CFTC chairman Rostin Behnam making the pitch in his confirmation hearing, while SEC Chairman Gary Gensler has not only been calling for SEC control, the agency has spent several years asserting its authority in court. And Acting Comptroller of the Currency Michael Hsu recently said stablecoins — a key sector — should be regulated like banks. Which the OCC happens to regulate.
Read more: Gensler: SEC Is Coming for Crypto Exchanges
See: OCC’s Hsu: Stablecoins Can Boost Innovation If Regulated Like Banks
Spreading authority between three agencies is not an ideal solution for an industry in which both the White House and Congress have shown a substantial and rapidly growing interest. Spreading it among a half dozen or more would be far from ideal for an industry that the government wants to nourish.
Also read: BNY Mellon CFO: U.S. Regulators Must Clarify Crypto Rules
The order would almost certainly cover stablecoins, a subset of crypto in which the government has taken a strong interest as central bankers and regulators that they could seriously damage financial stability.
Learn more: Powell, Yellen Clash Over Stablecoin Regulation
But it is unlikely to get into the issue of a digital dollar, as the Federal Reserve won’t even begin to make a recommendation on the desirability of a U.S. central bank digital currency (CBDC), until the summer.
See: Fed’s Digital Dollar Report Finally Drops, With More Questions Than Answers
The Fed’s long-awaited paper on the subject was deliberately lacking anything that resembled an opinion, making very clear that the central bank wanted public input — due in May — before beginning to formulate a policy.
More: The Three Most Important Questions for the Fed on Its CBDC Plans
What will likely become clear when the executive order’s reports are turned in is that crypto crosses so many areas — securities, commodities, stablecoins, taxation, criminal law enforcement, smart contract enforcement and many others — that it doesn’t fit readily into one pigeonhole. And with so many areas of concern and so many agencies to spread authority among, a separate authority does start to make sense.
Congressional Interest
Congress has been increasingly interested in crypto, with House Financial Services Committee and Senate Banking Committee each holding several hearings on the subject and several members taking on what amount to leadership roles on the topic.
Shortly before the end of the year, Cynthia Lummis (R-Wyo.) promised that she would introduce a comprehensive crypto regulatory bill in early 2022, while Sen. Elizabeth Warren (D-Mass.) has called for far stiffer consumer protection regulation, particularly in decentralized finance (DeFi).
See: Sen. Lummis’ Christmas Present to Crypto: Clear Regulation in the New Year
The extent of Congress’ interest in the subject was made clear during the debate over the $1 trillion infrastructure bill last year. After industry complaints about a detail tucked in the massive act that would have required know-your-customer gathering by parts of the industry that could not possibly do it — such as bitcoin miners and developers — 99 senators got together to agree to make a change, only to be derailed when one member objected in a fit of pique because his change wasn’t considered. As full Senate approval was required the change failed.
Read also: Senators Aim to Amend Infrastructure Bill’s Crypto Rules
Still, the incident showed the degree to which Congress was willing to act on the industry’s behalf when it said its interests were threatened. (Would it be cynical of us to point out that FTX crypto exchange CEO and billionaire Sam Bankman-Fried donated $5 million to the Biden campaign, making him the second-largest donor overall and illustrating that that the industry has serious fundraising potential?)
Circling back to our original point, there is enough interest on both sides of the aisle to make the creation of a new agency, that Congress can put its stamp on, a real possibility.
