In a move that’s set to reshape the cryptocurrency landscape, President Trump has signed an Executive Order entitled “Strengthening American Leadership in Digital Financial Technology” (the “Order”).
The Order establishes a working group composed of, among others, the Treasury Secretary, Commerce Secretary, Homeland Security Secretary, Attorney General and SEC and CFTC Chairs to identify all governmental regulations affecting digital assets, submit recommendations regarding how such regulations should be modified or rescind and submit a report to the President recommending regulatory and legislative proposals that advance the administration’s regulatory goals. The results of the working group are sure to lead to significant changes in the current cryptocurrency regulatory regime.
Notably, the Order is silent as to whether digital assets should be classified as “investment contracts” or otherwise as “securities” (and thereby regulated under the securities laws), but the working group is expected to suggest a regulatory framework whereby digital assets will be judged. Clarity on this point will be key for entrepreneurs and businesses in the digital asset space and investors alike.
The Order takes a strong stance against Central Bank Digital Currencies (“CBDCs”), by prohibiting agencies from actions related to establishing or promoting CBDCs. CBDCs have been criticized for privacy concerns as well as the centralized control the establishment of such a currency gives government actors in people’s daily lives. This decision sets the U.S. apart from many other nations actively exploring CBDCs. CBDCs have been launched in the Bahamas, Jamaica and Nigeria, and their launch is currently being explored by, among others, China and Russia.
Cryptocurrencies backed by the U.S. Dollar, however, are not being shunned, as the Order throws its weight behind the growth of stablecoins (i.e. cryptocurrency pegged to and backed by fiat currency) and asks the working group to establish a regulatory framework around this class of digital asset. This development could inject a new level of stability and credibility into the often volatile crypto market.
The Order rescinds certain executive orders and directives issued under the Biden administration, including notably the SEC’s Staff Accounting Bulletin 121. The repeal of SAB 121 will ease the regulatory burdens and capital requirements on those who provide custody or other services to crypto assets making it easier for crypto wallets and crypto exchanges to operate.
As we navigate this new era of crypto regulation, it is clear that the digital asset landscape is evolving rapidly.
The opportunities presented by the Order could be transformative. Whether you’re an investor eyeing the next big crypto opportunity or an entrepreneur or business looking to leverage blockchain technology, keeping a close watch on the developments arising from the Order will be crucial for success in the dynamic world of digital assets.