The White House issued a statement warning about the risks of cryptocurrencies, citing the various collapses that occurred last year. I spoke with a government official about the statement and its implications
The storyline
The White House issued a “roadmap to mitigate the risks of cryptocurrencies” last week, which was signed by (outgoing) National Economic Council Director Brian Deese, White House Office of Science and Technology Policy Director Arati Prabhakar, Council of Economic Advisors Chair Cecilia Rouse, and National Security Advisor Jake Sullivan.
Why it is significant
On the surface, the statement isn’t surprising. In fact, the cryptocurrency industry faced a difficult 2022. As I stated in a previous edition of this newsletter, simply keeping up with the various companies that have declared bankruptcy has caused our court database fees to skyrocket. Nonetheless, the statement suggests a more cautious approach to cryptocurrencies than US President Joe Biden’s executive order on cryptocurrency issued in March.
The statement began with a brief overview of “a difficult year” for crypto, mentioning the collapses of Luna and FTX but noting that there did not appear to be any contagion from the crypto industry to the broader financial ecosystem.
I spoke with a senior administration official about the statement, and he said it was part of Team Biden’s ongoing efforts to close regulatory gaps in the cryptocurrency ecosystem.
“We’re hopeful that Congress will take strong action addressing needs in this space,” the official said, adding that “we’re continuing to push forward on the administrative front, implementing a lot of the [executive order] recommendations as well as encouraging regulators… to continue their efforts to ramp up enforcement and crack down on bad practices in the space.”
The official cited Congressional actions such as Senator Sherrod Brown’s letter to Treasury Secretary Janet Yellen on crypto regulation and stated that the White House’s efforts would be focused on issues such as implementing the executive order’s recommendations.
Last week’s statement referred to previous White House announcements, such as the framework on digital assets, as well as statements issued by federal government departments, including a joint statement issued by bank regulators last week.
“However, recent events have demonstrated that more is required. Agencies have increased their efforts to combat fraud, including the proliferation of false or misleading claims that crypto assets are FDIC-insured. While the United States is already a global leader in combating money laundering and terrorist financing, law enforcement agencies are devoting more resources to combating illicit activities involving digital assets, according to the statement.
