A new White House directive on digital assets raises the likelihood of regulatory clarity and added investor protections in the growing cryptocurrency landscape, stakeholders said.
Whether institutional investors, which to date have largely steered clear of the asset class, jump in when and if further regulations are adopted is unclear, but the crypto industry is optimistic following a March 9 executive order from President Joe Biden outlining a federal digital assets strategy.
The order establishes a national policy for digital assets across six areas: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
Craig Salm, New York-based chief legal officer at Grayscale Investments LLC, which touts itself as the world's largest digital asset manager with $35.7 billion in assets under management, said the executive order was an "incredibly powerful" statement.
"America is unique in that we have several regulators that cover different use cases (in crypto) and to receive that level of coordination from the White House is important," Mr. Salm said. "It really boils down to the White House recognizing that crypto is here to stay and wanting America to be a leader in this space and be competitive with the rest of the world.”
Regulators at the Securities and Exchange Commission, Commodity Futures Trading Commission and Treasury Department are on the front lines with respect to crypto oversight. The SEC announced May 3 it will add 20 positions to the newly renamed crypto assets and cyber unit, which aims to protect investors in the crypto markets. The unit will now have 50 dedicated positions.
The White House order covers a wide range of issues and in part directs the Treasury Department and other regulators to assess and develop policy recommendations on how the digital asset sector could impact financial markets for consumers, investors, businesses and equitable economic growth. It also encourages regulators to ensure sufficient oversight and safeguard against any systemic financial risks posed by digital assets.
It’s a strategy crypto stakeholders can get behind, said Timothy Spangler, a Los Angeles-based partner with Dechert LLP. “It’s an acknowledgment that crypto is here to stay,” Mr. Spangler said. The executive order “seemed to be a pretty middle-of-the-road, pro-crypto response from the Biden administration, and the industry was pleased by that.”