White House Commends Regulators’ Crypto Efforts, Asks Congress to Do More
Several months after publishing its framework on the development of digital assets, the Biden administration added to its roadmap “to mitigate cryptocurrencies’ risks”. The release commends watchdogs for their efforts, acknowledges 2022 as a tough year for digital assets, and calls on Congress to increase its efforts with regard to the sector.
White House Published a Roadmap For Mitigating Crypto Risks
The “roadmap to mitigate cryptocurrencies”, published by key national security, economy, and science and technology White House advisors, seeks to assess the state of the crypto markets, as well as their overall effects on the economy, throughout the previous year. Without specifically naming them, the release strongly hints both at the LUNA collapse and the bankruptcy of FTX as industry-defining events of the year.
Similar to an earlier report by the Reserve Bank of India, the White House highlights that while the previous year was very tumultuous for digital assets, there wasn’t a significant spillover into the overall market. It, however, highlights that the events of the year had a disproportionate effect on younger investors and investors of color.
The roadmap highlights the continued work of the Administration when it comes to cryptocurrencies, which started in earnest with the release of the White House’s first-ever framework on digital assets and commends US regulators for “devoting increased resources” to the sector.
The release, however, mildly rebukes Congress calling on it to “step up its efforts”, primarily by expanding regulators’ powers over the sector. Furthermore, the document strongly warned institutions, like pension funds, from “diving headlong into cryptocurrency markets” possibly lending more credence to the efforts of the Elizabeth Warren-led group that tried to convince Fidelity to discontinue its Bitcoin 401(k) plans on multiple occasions throughout last year.
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The SEC Wants More Oversight Over Crypto Brokers, FED Makes it Tougher For Banks to Invest in Crypto
The White House was far from the only government institution adding to digital asset regulation this Friday. The Federal Reserve issued a statement for banks that may severely limit their ability to engage with cryptocurrencies, while the Securities and Exchange Commission proposed certain new rules under the Exchange Act of 1934.
FED’s new guidelines intend to limit the activities of local banks only to what is permitted for national banks—unless local regulations specifically allows an activity. The statement specifically discussed cryptocurrencies stating that “the Board has not identified any authority permitting national banks to hold most crypto-assets”, and concluded that “the Board would presumptively prohibit state member banks from engaging in such activity”.
This is the latest chapter in the global effort to more precisely define how banks should handle digital assets. For example, last year in December the Bank for International Settlements proposed that baking institutions intending to hold Bitcoin would have to first raise an equal amount in traditional assets to back the cryptocurrency.
Also on Friday, the SEC proposed a lengthy list of new rules under the Exchange Act which at multiple points and at length discusses the “crypto-assets securities” The Commission is calling for regulations forcing cryptocurrency brokers to provide more information on their activities. The SEC is also admitting it has limited visibility into the sector under the current framework harkening back to calls for increased authority over the sector called for both by itself and by the CFTC.
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