Ben Strack

<div id="highlights-block_6328925cda601" class="highlights">
 <ul>
 <li>More than half of respondents say a US CBDC would increase risks to privacy and security</li>
 <li>Survey was published the same day the White House released its first crypto framework</li>
 </ul>
 
</div>



As the federal government continues mulling how to best regulate crypto, a recent poll found that 55% of those surveyed said traditional banking regulations make them trust the industry more than the digital assets space.



The poll, published Friday by the Independent Community Bankers of America (ICBA), indicated that 71% believe investing in crypto is risky. Thirty-five percent of respondents are unaware that traditional banking sector laws do not apply to the segment.



The survey was released the same day that the White House shared <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/16/fact-sheet-white-house-releases-first-ever-comprehensive-framework-for-responsible-development-of-digital-assets/" target="_blank" rel="noreferrer noopener">its first “comprehensive framework”</a> for the crypto segment. The report came roughly six months after <a href="https://cms.blockworks.co/biden-signs-crypto-executive-order-promoting-responsible-innovation/" target="_blank" rel="noreferrer noopener">the Biden Administration’s executive order</a> in March that tasked government agencies with creating a pathway for regulating crypto and identifying the risks and potential for innovation within the space.



Reports so far gathered by President Biden recommend that agencies, such as the SEC and Commodity Futures Trading Commission (CFTC), should “aggressively” look to combat crypto-related crime, according to the framework published Friday.&nbsp;



Some industry watchers <a href="https://cms.blockworks.co/white-houses-latest-crypto-framework-lacks-clarity-some-say/" target="_blank" rel="noreferrer noopener">told Blockworks</a> Friday that the White House’s framework lacked specifics and leaned too heavily on the message of regulating by enforcement. 



The White House’s report said that the May crash of Terra’s algorithmic stablecoin and subsequent insolvencies that wiped out about $600 billion of investor funds highlights the need for more crypto education.



The Financial Literacy Education Commission (FLEC) will lead efforts to help investors understand crypto risks, identify fraudulent practices and learn how to report misconduct.



The ICBA poll also discovered that more than half of those surveyed — including a bipartisan majority — say the establishment of a US central bank digital currency (CBDC) would increase the risk of their personal financial privacy and security being breached.



While the Biden administration believes a CBDC could be beneficial, further research and development on the technology that would support a digital form of the dollar is needed, according to the framework.



“Policymakers should prioritize protecting national security amid catastrophic developments in the crypto markets while collaborating on a comprehensive regulatory framework that utilizes more effective alternatives to a US CBDC — including the <a href="https://www.frbservices.org/financial-services/fednow/about.html" target="_blank" rel="noreferrer noopener">FedNow</a> instant payments service,” ICBA President Rebeca Romero Rainey said in a statement.



The ICBA poll was conducted by Morning Consult last month and surveyed roughly 2,000 registered voters.



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Americans Understand Crypto Risks, but Not Regulations, Survey Finds

<div id="highlights-block_6324cf0d90fff" class="highlights">
 <ul>
 <li>Blockchain Association’s director calls the report “a missed opportunity to cement US crypto leadership”</li>
 <li>The Treasury department intends to publish risk assessments on DeFi and NFTs next year</li>
 </ul>
 
</div>



Six months after unveiling <a href="https://cms.blockworks.co/bidens-crypto-executive-order-may-be-watershed-moment-despite-lack-of-specifics/" target="_blank" rel="noreferrer noopener">an executive order</a> on digital assets, President Biden’s administration on Friday rolled out a “comprehensive” crypto framework that some industry participants say is lacking in details.&nbsp;



Since calling on a swath of agencies to study how to oversee crypto responsibly, the president has so far received nine reports, <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/16/fact-sheet-white-house-releases-first-ever-comprehensive-framework-for-responsible-development-of-digital-assets/" target="_blank" rel="noreferrer noopener">the White House said</a>.&nbsp;



The reports encourage the SEC and Commodity Futures Trading Commission (CFTC) “to aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space,” among other recommendations.



The call comes after industry watchers told Blockworks last month <a href="https://cms.blockworks.co/crypto-industry-eyes-secs-regulation-by-enforcement-ramp-up/" target="_blank" rel="noreferrer noopener">they expect “regulation by enforcement” to continue</a> in the absence of concrete crypto legal frameworks.



Robert Baldwin, head of policy at the Association for Digital Asset Markets (ADAM), said the framework’s lack of legislative recommendations, or a clear pathway for SEC and CFTC cooperation, will likely result in “continued scattershot regulation by enforcement” that may not be technologically neutral.&nbsp;&nbsp;



“This is, in my mind, a bad outcome, which stands in juxtaposition to recent happenings in Congress, where we are starting to see bipartisan consensus formed around appropriate vehicles for market regulation and protections,” Baldwin told Blockworks.&nbsp;



Sens. Debbie Stabenow, D-Mich., and John Boozman, R-Ark., proposed in August the <a href="https://cms.blockworks.co/bitcoin-ether-to-be-regulated-as-commodities-by-cftc-per-new-senate-bill/" target="_blank" rel="noreferrer noopener">Digital Commodities Consumer Protection Act</a>, which would place commodities under the CFTC’s jurisdiction.



CFTC Chair Rostin Behnam <a href="https://cms.blockworks.co/cftc-preparing-to-oversee-crypto-behnam-tells-senators/" target="_blank" rel="noreferrer noopener">told senators</a> during a Thursday Senate Agriculture Committee hearing that the commission is prepping to become the crypto industry’s watchdog.&nbsp;



<h3 class="wp-block-heading">A focus on illicit finance, risks</h3>



The White House’s latest framework dedicates a section to fighting illicit finance, highlighting the May crash of Terra’s algorithmic stablecoin and the subsequent wave of insolvencies that wiped out roughly $600 billion of investor funds, the guidance says.



Biden is evaluating whether to call upon Congress to amend the Bank Secrecy Act and other laws against unlicensed money transmitting to apply explicitly to digital asset service providers, such as exchanges and NFT platforms.



<a href="https://cms.blockworks.co/binance-under-investigation-over-bank-secrecy-act-report/" target="_blank" rel="noreferrer noopener">Reuters reported earlier this month</a> that US authorities are investigating whether Binance violated the Bank Secrecy Act.&nbsp;



Biden also may look to allow the Department of Justice to prosecute digital asset crimes in any jurisdiction where a victim of those crimes is found, the latest report states.



But Sheila Warren, CEO of the Crypto Council for Innovation, said the White House’s Friday update “seems to kick the can down the road” without new and clear recommendations.&nbsp;&nbsp;



“This is surprising given the clear instructions from the [executive order] and work from members of Congress to move things forward,” Warren told Blockworks in an email. “Regulation by enforcement is not regulatory clarity. If we regulate by enforcement, it also gives other countries a clear runway to figure out how the tech works for their interests, which may be contrary to the US&#8217;s.”



As for future reports, the Financial Stability Oversight Council (FSOC) is set to publish one in October focused on labeling digital assets’ financial stability risks and identifying regulatory gaps.



The Treasury Department intends to complete an illicit finance risk assessment on decentralized finance by February 2023 and an assessment on NFTs by July 2023.



The framework adds that while a US central bank digital currency (CBDC) has the potential to offer significant benefits, further research and development on the technology that would support a digital form of the dollar is needed.&nbsp;&nbsp;



Kristin Smith, executive director of Blockchain Association, called the framework “a missed opportunity to cement US crypto leadership.”



“While intended to be part of a broader government and stakeholder effort to bring better regulation to crypto assets, these reports focus on risks – not opportunities – and omit substantive recommendations on how the United States can promote its burgeoning crypto industry, including job creation, improvements to the financial system and expanded access for all Americans,” Smith told Blockworks in an email.



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White House’s Latest Crypto Framework Lacks Clarity, Some Say

Casey Wagner

<div id="highlights-block_62c74dcf40da9" class="highlights">
 <ul>
 <li>The Secretary of the Treasury, the Secretary of State, the Secretary of Commerce, the Administrator of the US Agency for International Development (USAID) and &#8220;the heads of other relevant agencies” collaborated on the report</li>
 <li>The framework, which includes the word “risk” 16 times, &#8220;is intended to ensure that&#8230;America&#8217;s core democratic values are respected.” </li>
 </ul>
 
</div>



A group of US regulators urged the federal government to work with other nations as countries around the world grapple with digital asset regulation.&nbsp;



At least four US watchdogs — the Secretary of the Treasury, the Secretary of State, the Secretary of Commerce and the Agency for International Development (USAID) — as well as “other relevant agencies” chimed in on the report, the first of many expected frameworks governing cryptocurrency companies and trading more broadly.&nbsp;



The write-up lays out preliminary guidelines regarding how the US ought to work with other friendly governments on blockchain oversight, according to a Thursday <a href="https://home.treasury.gov/news/press-releases/jy0854" target="_blank" rel="noreferrer noopener">statement</a> from the Treasury.



The framework — which references “risk” a notable 16 times —&nbsp; is “intended to ensure&#8230;America&#8217;s core democratic values are respected,&#8221; according to the statement.&nbsp;



Highlights include greater guidance around stablecoins — which Treasury Secretary <a href="https://cms.blockworks.co/tag/janet-yellen/" target="_blank" rel="noreferrer noopener">Janet Yellen</a> has urged caution over, especially when it comes to retail investors after the implosion of <a href="https://cms.blockworks.co/yellen-ust-collapse-could-have-been-avoided-with-rules-for-stablecoin-issuers/" target="_blank" rel="noreferrer noopener">Terra stablecoin UST</a> — plus an emphasis on needing to “watch out for instability and crime from digital assets.”



“We’ve just had over this last week with Terra and with Tether an illustration of the risks associated with <a href="https://cms.blockworks.co/the-investors-guide-to-stablecoins/" target="_blank" rel="noreferrer noopener">stablecoins</a>…there can be runs,” Yellen said during a May congressional hearing. 



Yellen and a number of prominent politicians on the federal level have urged regulators to treat stablecoins and similar digital assets like banks — which industry participants have decried. Stablecoins are typically meant to be crypto’s version of stable fiat currencies, tied to the US dollar or another legal tender.&nbsp;



“The United States continues work on the G20 roadmap for addressing challenges and frictions with cross-border payments, including on improvements to existing systems, potential impediments from data localization and other frictions in data governance frameworks, the international dimensions of CBDC designs, and the potential of well-regulated stablecoin arrangements,” the statement said.&nbsp;



It’s not the first time regulators have expressed concern over the growing market segment of stablecoins.&nbsp;



In November 2021, the President’s Working Group on Financial Markets (PWG), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) issued a joint report on the “risks” stablecoins.&nbsp;



“To address risks to stablecoin users and guard against stablecoin runs, legislation should require stablecoin issuers to be insured depository institutions, which are subject to appropriate supervision and regulation, at the depository institution and the holding company level,” the <a href="https://home.treasury.gov/system/files/136/StableCoinReport_Nov1_508.pdf" target="_blank" rel="noreferrer noopener">report</a> said.&nbsp;



The latest guidance Thursday does not mention when other regulatory institutions mentioned in the executive order may release subsequent reports. President Biden’s stance on stablecoins is likewise unclear.



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US Regulators Release First of Many Reports on Crypto Following Exec Order

<div id="highlights-block_6234b7c7b19c3" class="highlights">
 <ul>
 <li>National Security Advisor Jake Sullivan and National Economic Council Director Brian Deese will coordinate the executive order’s implementation</li>
 <li>Treasury Secretary Janet Yellen and Attorney General Merrick Garland are tasked with various analyses around digital asset implications</li>
 </ul>
 
</div>



In his executive order last week, President Joe Biden called on a swathe of government agencies to work together to study the “responsible development” of digital assets.



But who is in charge of what, and when exactly will these efforts conclude?



Biden notes in the executive order that the assistants to the president for national security affairs and for economic policy “shall coordinate the executive branch actions necessary to implement this order.”



Jake Sullivan, a national security advisor for President Biden since January 2021, was previously the deputy assistant to former President Barack Obama, a national security advisor to Biden during his tenure as vice president, and deputy chief of staff to Hillary Clinton at the State Department.



Brian Deese serves as the director of the National Economic Council (NEC). Between 2009 and 2015, he was a special assistant for economic policy to Obama, deputy director of the NEC, and acting director of the Office of Management and Budget. He also served as a senior advisor to Obama from 2015 to 2017.



Before his latest appointment, Deese worked as the global head of sustainable investing for BlackRock, the world’s largest asset manager.



“We are clear-eyed that ‘financial innovation’ of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk,” Sullivan and Deese said in a statement published alongside the executive order.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“This history underscores the need to build robust consumer and economic protections into digital asset development.”</blockquote>



John Collins, partner at advisory firm FS Vectors and former policy head at Coinbase, called Sullivan and Deese “incredibly smart and well respected.”



“Their positions as leaders here is a really good indication of where [the government’s] head is at,” he told Blockworks.



<h3 class="wp-block-heading">Which agencies are involved?</h3>



The interagency process that Sullivan and Deese lead shall include the following entities, Biden notes in the order:



<ul class="wp-block-list"><li>the secretaries of state, treasury, defense, commerce, labor, energy and homeland security; </li><li>the attorney general;</li><li>the administrator of the Environmental Protection Agency;</li><li>the director of the Office of Management and Budget; </li><li>the director of National Intelligence; </li><li>the director of the Domestic Policy Council;</li><li>the chair of the Council of Economic Advisers; </li><li>the director of the Office of Science and Technology Policy; </li><li>the administrator of the Office of Information and Regulatory Affairs; </li><li>the director of the National Science Foundation; and </li><li>the administrator of the United States Agency for International Development.</li></ul>



“Governments alone cannot solve these problems, and definitely not a government that operates in silos,” Sullivan and Deese said in the statement.



Officials from other agencies may be invited to attend interagency meetings, Biden adds in the order, including representatives from:



<ul class="wp-block-list"><li>the Board of Governors of the Federal Reserve System;</li><li>the Consumer Financial Protection Bureau;</li><li>the Federal Trade Commission (FTC);</li><li>the Securities and Exchange Commission (SEC);</li><li>the Commodity Futures Trading Commission (CFTC);&nbsp;</li><li>the Federal Deposit Insurance Corporation (FDIC); and</li><li>the Office of the Comptroller of the Currency (OCC).</li></ul>



A report by bitcoin company NYDIG argued that the executive order “notably excluded strong input from financial regulators such as the SEC, CFTC and OCC.”



<h3 class="wp-block-heading">When are the deadlines?</h3>



The <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/" target="_blank" rel="noreferrer noopener">executive order</a> focuses on crypto regulation around consumer protection, financial stability, risk mitigation, the US’s financial leadership, financial inclusion and responsible innovation.



Biden has tasked Treasury Secretary Janet Yellen to submit a report on the implications of digital asset adoption and the changes in financial market and payment system infrastructures within six months.



She is to convene the Financial Stability Oversight Council (FSOC) within seven months to outline financial stability risks and regulatory gaps posed by digital assets and offer recommendations to address them.



Yellen is also expected to produce a report about the future of money and payment systems within six months. The report should include the potential implications of a US central bank digital currency (CBDC), the executive order states.



Federal Reserve Chair Jerome Powell is encouraged to research and report on the extent to which CBDCs could improve the efficiency and reduce the costs of existing and future payments systems. He has been asked to detail the steps for the potential launch of a CBDC.&nbsp;



In its January <a href="https://cms.blockworks.co/fed-opens-debate-on-cbdc-takes-no-policy-stance/" target="_blank" rel="noreferrer noopener">Central Bank Digital Currency report</a>, the Federal Reserve declined to make policy recommendations.



Attorney General Merrick Garland is to assess whether legislative changes would be necessary to issue a US CBDC within six months. He will also issue a report in that timeframe on the role of law enforcement agencies in detecting, investigating and prosecuting criminal activity related to digital assets.



Other planned research includes distributed ledger technology’s impact on the environment, which Dr. Alondra Nelson, director of the Office of Science and Technology Policy, will submit within six months.



Commerce Secretary Gina Raimondo shall establish a framework for enhancing the country’s economic competitiveness in, and leveraging of, digital asset technologies.



The Senate Committee on Banking, Housing and Urban Affairs <a href="https://cms.blockworks.co/impossible-for-russia-to-evade-sanctions-with-crypto-fincen-rep-says/" target="_blank" rel="noreferrer noopener">held a meeting Thursday</a> addressing the role of digital assets in illicit finance.



Up to 90 days after illicit finance risks are submitted to the Congress of the National Strategy for Combating Terrorist and Other Illicit Financing, Yellen, Garland and Secretary of State Antony Blinken, among others, may offer additional views on the topic.



Yellen shall then develop a coordinated action plan based on the strategy’s conclusion within 120 days, the executive order notes.



Additionally, Biden has ordered Garland to analyze how to strengthen international law enforcement cooperation for detecting, investigating and prosecuting <a href="https://cms.blockworks.co/impossible-for-russia-to-evade-sanctions-with-crypto-fincen-rep-says/" target="_blank" rel="noreferrer noopener">criminal activity</a> related to digital assets.



Though <a href="https://cms.blockworks.co/bidens-crypto-executive-order-may-be-watershed-moment-despite-lack-of-specifics/" target="_blank" rel="noreferrer noopener">industry watchers said</a> the executive order was an important step in the policymaking process, they said legislation could take years.



“We may not like every single policy proposal that’s put forth six months from now,” Blockchain Association Executive Director Kristin Smith previously told Blockworks. “But at least we can think methodically about this and engage with the government.”



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Who’s in Charge of What? Breaking Down the Crypto Executive Order

<div id="highlights-block_622f858b9d31f" class="highlights">
 <ul>
 <li>Illinois state representative sponsors another bill aimed at bringing regulatory clarity to the space</li>
 <li>Illinois will not be taking after other states looking to establish bitcoin as legal tender</li>
 </ul>
 
</div>



A bill that would allow the Illinois Department of Revenue (IDR) to accept crypto payments as easily as it accepts credit card transactions has moved forward to the state Senate.&nbsp;



<a href="https://ilga.gov/legislation/fulltext.asp?DocName=&amp;SessionId=110&amp;GA=102&amp;DocTypeId=HB&amp;DocNum=5287&amp;GAID=16&amp;LegID=139797&amp;SpecSess=&amp;Session=" target="_blank" rel="noreferrer noopener">House bill 5287</a>, sponsored by Illinois state Representative Margaret Croke, would allow the IDR to create rules and regulations around accepting cryptocurrencies as a payment method. The IDR has expressed interest in being able to process digital asset payments similar to how it accepts credit cards, Croke said, sparking the inspiration behind the bill.



“When the state of Illinois accepts a credit card payment for the purposes of collecting revenue, for taxes or other payments, we have a third party processor,” Croke, a Democrat representing Illinois’ 12th District, said. “Similarly, we would have a situation where someone, if they chose to pay via cryptocurrency, would go through a crypto processor and then the state of Illinois would receive US dollars.”&nbsp;



The IDR will have final say over which types of payments it allows to be made in cryptocurrency, Croke said, but it could potentially apply to businesses looking to pay taxes in digital assets.



The bill passed the House and moved to the Illinois Senate in late February. Croke said there should not be “any issues” in moving the bill forward in the next month or so.&nbsp;



<h3 class="wp-block-heading">Legal tender question&nbsp;</h3>



While the measure may sound similar to efforts in <a href="https://cms.blockworks.co/arizona-considers-making-bitcoin-legal-tender/" target="_blank" rel="noreferrer noopener">Arizona</a> and <a href="https://cms.blockworks.co/to-make-bitcoin-legal-tender-in-ca-bitcoiners-may-have-to-rewrite-constitution/" target="_blank" rel="noreferrer noopener">California</a> to establish bitcoin as legal tender, Croke made it clear that Illinois is only interested in operating within the current rules. According to the Constitution, defining “legal tender” falls under the power of Congress, she acknowledged. 



“What I don&#8217;t want to happen is that as a state we move so quickly that we end up having to roll back or get usurped by the federal government,” Croke said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I don&#8217;t want to get to a point where someone has been operating a business for a year in Illinois, and all of a sudden, the federal government comes in and says, ‘you&#8217;ve got to change everything you&#8217;ve been doing.’” </blockquote>



Regardless of the legislative branch’s power, action from the federal government has been slow, Croke said. The recent <a href="https://cms.blockworks.co/bidens-crypto-executive-order-may-be-watershed-moment-despite-lack-of-specifics/" target="_blank" rel="noreferrer noopener">executive order</a> from the Biden administration shows that digital asset regulation is being thought about on a federal level, but clear guidelines are necessary, she added. 



“I always joke when we don&#8217;t know what to do in the legislature, we create a task force or a report,” Croke said. “That being said, I&#8217;m glad that there is this level of motivation…to really dive into the topic and give clear direction on what the Biden animation administration wants to around cryptocurrency.”&nbsp;



Another <a href="https://cms.blockworks.co/this-state-representative-is-out-to-make-illinois-the-next-crypto-hub/" target="_blank" rel="noreferrer noopener">crypto-focused bill</a>l that Croke sponsored is slated for a revamp following new guidance from the Office of the Comptroller of the Currency in a somewhat rare case of federal policy moving more quickly than state legislation.



House bill number <a href="https://www.ilga.gov/legislation/BillStatus.asp?DocNum=3968&amp;GAID=16&amp;DocTypeID=HB&amp;SessionID=110&amp;GA=102" target="_blank" rel="noreferrer noopener">3968</a>, a digital assets-focused proposal that would allow financial technology companies in the state to hold cryptocurrencies, passed the Souse in April 2021 and made it to the state Senate before the OCC ruling came out.



“The bill applied to existing banking institutions chartered with the State of Illinois, and now they don&#8217;t need to be included in this legislation because they&#8217;ve received the guidance that they needed on the federal level,” Croke said. “Now it just applies to new special purpose trust companies.”



HB 3968 is technically still in the Senate, but before it is introduced to the House, Croke hopes to file a new bill in the Senate. The Illinois state House, Croke said, tends to be more progressive than the Senate when it comes to cryptocurrency.



“Not necessarily two words you always hear together in the political sphere: progressives and cryptocurrency,” she said. “Cryptocurrency is still a very novel idea for a lot of people.”



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Illinois Moves Closer To Accepting Crypto for Taxes, but Not Considering Legal Tender Status

<div id="highlights-block_622a60ed26b55" class="highlights">
 <ul>
 <li>Interagency research may alleviate SEC crypto concerns around fraud and manipulation, WisdomTree’s chief legal officer said</li>
 <li>The executive order does not affect the SEC’s stance in the short term, according to Global X’s director of research</li>
 </ul>
 
</div>



On the heels of President Biden rolling out his inaugural executive order on cryptocurrency, US asset managers are touting the development as a bullish indicator for the long-awaited spot bitcoin ETF.



The timeline for the Securities and Exchange Commission’s approval of such a product, however, is anyone’s guess.&nbsp;



The <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/" target="_blank" rel="noreferrer noopener">executive order</a> focuses on crypto policy surrounding consumer protection, financial stability, risk mitigation, the country’s financial leadership, financial inclusion and responsible innovation.



Though industry watchers have called the order an important step in the policymaking process, <a href="https://cms.blockworks.co/bidens-crypto-executive-order-may-be-watershed-moment-despite-lack-of-specifics/" target="_blank" rel="noreferrer noopener">some told Blockworks</a> concrete legislation could take years.



Setting up a unified framework to dictate how the government will regulate crypto will reduce bureaucratic red tape and help would-be spot bitcoin ETF issuers learn the new rules of the road, according to Lara Crigger, managing editor of ETF Trends and ETF Database.



“If you are the US government and you&#8217;re going to do something as groundbreaking as, say, approve the first spot bitcoin ETF in the US, you&#8217;d need this framework in place before you could even consider doing it,” Crigger said.&nbsp;



<h3 class="wp-block-heading">ETP issuers weigh in</h3>



Craig Salm, chief legal officer at Grayscale Investments, said regulators’ approval of a spot bitcoin ETF is a matter of when, not if.



The firm is trying to convert its Grayscale Bitcoin Trust (GBTC) to an ETF. <a href="https://cms.blockworks.co/support-for-spot-bitcoin-etf-revs-up-as-agency-holds-course/" target="_blank" rel="noreferrer noopener">Public comments</a> have rolled in from investors — as well as executives from crypto companies such as Coinbase and BlockFi — with most supporting the move. The SEC is expected to rule on the conversion by July after a 240-day review period.



“What the executive order will do is enable the SEC to do their own studies and have their own findings, which I believe will also result in support for a spot bitcoin ETF, because the markets are ready,” Salm said.



A spokesperson for the SEC did not immediately return a request for comment.



WisdomTree Chief Legal Officer Ryan Louvar said it’s not typical to see an executive order that involves so many governmental bodies and takes a global approach.



But financial regulators such as the SEC, Commodity Futures Trading Commission (CFTC) and the Office of the Comptroller of the Currency (OCC), are not prominently featured in the executive order. Rather, it relies on coordination and input from other agency heads, such as the secretary of state, the secretary of the Treasury and the attorney general.



“To the extent that the order is calling for research and coordination among federal agencies to continue to gain greater depth around the digital asset marketplace, part of that is the SEC’s concerns around potential fraud and manipulation,” Louvar said. “If this research, assessment and coordination can help address those concerns…I think that will potentially help spur or at least add the potential for an approval.”



The company <a href="https://cms.blockworks.co/wisdomtree-amends-bitcoin-etf-application/" target="_blank" rel="noreferrer noopener">amended its ETF application</a> in December that would invest directly in bitcoin a week after the SEC rejected its original proposal. WisdomTree already offers ETPs in Europe that hold crypto directly.



Also offering such products overseas is Global X, which launched its first physically backed crypto offerings on Thursday. The bitcoin and ether ETPs (exchange-traded products) are now trading in Germany, and the company continues to pursue a US bitcoin ETF that it first <a href="https://cms.blockworks.co/global-x-adds-to-stack-of-bitcoin-etfs-proposed-to-sec/" target="_blank" rel="noreferrer noopener">filed with the SEC</a> in July.



Pedro Palandrani, director of research at Global X, said the executive order urges the SEC to build a roadmap toward mitigating risk while also embracing financial technology upgrades, but it does not affect the agency’s views in the short term.



“A spot ETF approval, or lack of, really relies on the SEC’s approach towards the space and, while it’s not easy to paint a picture of how this will evolve over time, the mandate focuses on encouraging a working plan towards its potential adoption,” Palandrani said.



Hany Rashwan, CEO of Swiss ETP issuer 21Shares, called the executive order a “significant step” that could open doors for the firm in the US. The world’s largest ETP provider, the firm has 28 products trading across Europe and <a href="https://cms.blockworks.co/ark-files-for-bitcoin-etf/" target="_blank" rel="noreferrer noopener">filed last year</a> to launch a bitcoin ETF in the US with Ark Invest.



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Will Biden’s Executive Order Speed Up Spot Bitcoin ETF Approval?

<div id="highlights-block_62292a5a42650" class="highlights">
 <ul>
 <li>The Biden administration’s roadmap shows the US wants to be a leader in digital assets, says former Coinbase policy head</li>
 <li>The executive order calls for “placing urgency” on the research and development of a potential US CBDC, but does not mention stablecoins</li>
 </ul>
 
</div>



The new executive order on digital assets from President Biden is an important step in the policymaking process, according to industry watchers, though concrete legislation could take years.



Biden <a href="https://cms.blockworks.co/biden-signs-crypto-executive-order-promoting-responsible-innovation/" target="_blank" rel="noreferrer noopener">signed the executive order</a> Wednesday, which outlines the government’s approach to digital assets and their underlying technology, according to a White House statement.



John Collins, partner at advisory firm FS Vectors and former policy head at Coinbase, said while Biden’s executive order held few surprises, the fact that the administration is stepping in is a net positive for the industry.&nbsp;



Collins compared the executive order to the Clinton administration’s “Framework for Global Electronic Commerce” released in the 1990s, which studied the future of the internet.



“It’s clear that the administration realizes that this is not going away and that they really stress the critical importance of the technology in various applications to the benefit of the financial system going forward,” Collins said. “They want to make sure that the US is ahead of it.”



The price of bitcoin was roughly $41,840 at 4 pm ET — up 8.6% in 24 hours.



“An effort to establish more clarity to the regulatory framework will definitely bring more confidence to investors and welcome more Americans to the crypto ecosystem,” said Thomas Hook, Bitstamp’s US chief compliance officer. “While crypto markets may continue to be volatile, today&#8217;s news shows that recognition from the Biden administration is encouraging to the market.”



<h3 class="wp-block-heading">What’s next?</h3>



The order outlines its focus on crypto regulation around consumer protection, financial stability, risk mitigation, the US’s financial leadership, financial inclusion and responsible innovation.



There will likely be requests for information, roundtable discussions and working groups formed in coming months, though concrete actions will take time, Collins said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Throughout there’s a recognition that there needs to be more clarity,” he said. “Maybe it’ll be on securities issues, maybe it’ll be on illicit finance, maybe it’ll be on other things — probably all of them, and I think that’s good.”</blockquote>



Kristin Smith, executive director of the crypto lobbyist Blockchain Association, told Blockworks the start of fact-gathering and research around these topics is “a really healthy first step in a policymaking process.”



The order calls for agency reports to be completed within six months, with lawmakers and the public then having the chance to weigh in.&nbsp;



“Obviously we’ve got a lot of work ahead of us, and we may not like every single policy proposal that’s put forth six months from now, but at least we can think methodically about this and engage with the government,” Smith said.&nbsp;



<h3 class="wp-block-heading">A call to further study CBDCs</h3>



Among the more surprising pieces of the order, Smith said, was the focus on central bank digital currencies (CBDCs).&nbsp;



It calls for “placing urgency” on the research and development of a US CBDC — though that’s not a guarantee it would ever be rolled out — as well as assessing requisite technology.



In its January <a href="https://cms.blockworks.co/fed-opens-debate-on-cbdc-takes-no-policy-stance/" target="_blank" rel="noreferrer noopener">Central Bank Digital Currency report</a>, the Federal Reserve declined to make policy recommendations.&nbsp;



The Blockchain Association is neutral.



“I think the important thing for us is we want the ability of private organizations and individuals to build technology around the dollar, and that’s what we’ve seen with dollar-backed stablecoins,” Smith said.&nbsp;



<a href="https://cms.blockworks.co/the-investors-guide-to-stablecoins/" target="_blank" rel="noreferrer noopener">Stablecoins</a> are conspicuously absent from the executive order. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell have both expressed concern over their security and safety.



“It’s not surprising that stablecoins are not mentioned, because Yellen is already working on it in detail,” John Belizaire, founder and CEO of Soluna Computing, said. “Also, a US digital currency is a competitor to stablecoins.”&nbsp;



Congress is looking to tighten its reins on stablecoins. Bills along those lines will likely be introduced by US lawmakers later this month, <a href="https://cms.blockworks.co/congressional-action-on-stablecoins-could-come-as-soon-as-this-month-source-says/" target="_blank" rel="noreferrer noopener">Blockworks reported</a>.



Jeremy Allaire, CEO of Circle, the issuer behind the largest stablecoin, USD Coin (USDC), called the executive order a “watershed moment.”



“The US government now has a whole-of-government approach for supporting the open, internet-native economic infrastructure ushered in by new Web3 technologies — bringing the country a step closer to ensuring the US dollar remains the currency of the internet and that the US remains the home of principled innovation and competition,” Allaire said.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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