Key Points re: Biden and Crypto
While the crypto market is in the midst of a significant rally, one likely fueled by the banking fiasco, the Biden administration recently released its annual Economic Report of the President, and it could prove to be a challenging obstacle for the nascent asset class.
The report covers a multitude of topics ranging from unemployment, supply chain challenges, climate change, and of course, cryptocurrency. To say the report is less than friendly to crypto might be an understatement, but let’s take a look at some of the key points.
What the report had to say
The underlying tone of the Biden administration’s viewpoint on crypto could be described as scathingly sarcastic. Look not further than the title of the chapter “Digital Assets: Relearning Basic Economic Principles.”
The analysis of cryptocurrency is in a format where supposed claims and benefits of cryptocurrency are posed, such as improving payment systems, increasing financial inclusion, or alternative ways for one to hold value. These are then countered with opposing arguments that the promise of cryptocurrencies is hollow and built on the idea of artificial scarcity. In the report’s words, “crypto assets have brought none of these benefits” and “many of them have no fundamental value.”
Instead, it likely signals that the Biden administration is laying the foundation for more targeted regulation of the industry. Based on several high-profile lawsuits already in 2023, this looks as though it could only get worse. Second, it seems this targeting is in preparation for the rollout of the U.S. government’s new FedNow, a 24/7 instant payment system to be unveiled in late 2023 and touted as a true solution that could dramatically streamline financial processes in the U.S., or so the report claims. Lastly, vindicating cryptocurrencies is paving the way for the introduction of the government’s own central bank digital currency (CBDC), which would essentially turn the U.S. dollar into a digital asset.
So what does this all mean for the average crypto investor?
At first glance, the most concerning aspect could be the looming regulation. It is more than likely that a majority of cryptocurrencies in circulation will be deemed securities and thus subject to increased regulation in the coming years or even months. This could also lead to a dramatic restructuring of the numerous companies whose business models rely upon digital assets.
Suppose legislators decide to take a course of action that is not conducive to fostering growth but rather impedes the development of cryptocurrencies and digital assets. In that case, it could deal a considerable blow to prices.
While this might sound like doom and gloom, there is still hope.
Due to their decentralized characteristics, cryptocurrencies are outside the control of any government or agency. In addition, cryptocurrencies are traded internationally. Let’s say the U.S. imposes broad and sweeping regulation of crypto. If this does happen, it might be less than ideal, but the reality is regulations in one country may not have a significant impact on the global market.
Political Impact
ARK Invest’s Cathie Wood says the Biden Administration’s abrupt escalation against the crypto industry will have consequences at the ballot box.
In a new interview with economist Arthur Laffer, Wood says there is no doubt that the approximately 50 million Americans who own Bitcoin and crypto assets are closely watching recent moves from the White House.
Wood says the administration’s actions and the language in a new economic report suggest President Biden fears crypto and does not support American businesses involved in the industry.
“I don’t know if you saw the President’s annual economic report. It came out a couple of days ago and it went after crypto. Big time.
They saw no role for [crypto]. Well, it has to be somewhat threatening [for the report to be so negative]…
I honestly think – and we’re seeing with young people especially – this is going to become a national election issue.”
President Biden’s 2023 crypto crackdown includes SEC confrontations with the US-based crypto companies Genesis, Kraken, and Coinbase.
The administration also shuttered crypto-friendly banks Silvergate and Signature Bank, with former Congressman Barney Frank stating Signature Bank was specifically shut down to send a message on crypto.
Wood says the SEC’s apparent intention to sue the US-based crypto exchange Coinbase will ultimately bring clarity to the industry.
She believes the potential lawsuit could bring the issue of whether Americans should be able to freely trade and hold crypto assets all the way to the Supreme Court.
“The SEC issued Coinbase a Wells Notice, and so we’re getting a sense of how they’re going to come at Coinbase.
But Coinbase has been preparing for this. So I think this is going to go to the courts, and the courts will give it to Congress where it should be.
And I think [Coinbase is] willing to take this all the way to the Supreme Court, but in the interim I think this becomes a national election issue.”
You can check out the full interview here.
Featured Image: Shutterstock/A. Solano
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