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The steady development of the cryptocurrency industry worldwide and domestically has led the executive branch of the federal government to lay the groundwork for regulation of these assets. The move, embodied in an executive order signed Wednesday by President Joe Biden, has drawn applause from some payments trade groups, though they caution that government action should be careful to preserve a competitive landscape for crypto transactions.
“Given that the existing payments system in the U.S. is competitive, safe, effective, dynamic, and efficient, ETA urges policymakers to move thoughtfully and deliberately to ensure that any policy proposal best serves the needs of consumers, furthers financial inclusion, preserves and strengthens the financial system, and ensures that consumers continue to have access to a robust and innovative array of secure financial services and payment options,” says the Electronic Transactions Association in a release reacting to Biden’s Executive Order.
Biden’s order, “Ensuring Responsible Development of Digital Assets,” comes as a number of startups and established payments firms have begun to offer crypto-based transaction processing, as digital-asset exchanges begin to expand and mature, and as the Federal Reserve and other government officials begin investigating the potential for a central bank digital currency for the United States.
The Executive Order, which carries a six-month deadline, requires a range of federal agencies to study cryptocurrencies as well as the idea of a U.S. CBDC. The effort is meant to form the basis for a common strategy across the government for regulation of crypto assets. “We commend President Biden for releasing this Executive Order and are strongly encouraged that it reflects principles that are consistent with ETA’s own,” Jodie Kelley, chief executive of the ETA, said in a statement. “ETA members lead the payments and crypto space, and we look forward to continuing to work with policymakers as guidelines begin to take shape.” The ETA is a Washington, D.C.-based trade group representing more than 500 payments-technology providers, processors, and other payments firms around the world.
Estimates of how much of U.S. commerce stems from cryptocurrency vary, but crypto transactions, though growing in number, still represent a small fraction of overall digital-payment activity. Still, major payments firms like PayPal Holdings Inc., Block Inc., Visa Inc., and Mastercard Inc. have initiated programs to enable transactions through Bitcoin and other cryptocurrency. Digital wallets from PayPal and Block allow users to acquire, store, and spend blockchain-based assets, though in nearly all cases merchants receive fiat currency rather than the wallet user’s crypto.
Central bank digital currencies are digital tokens representing a national fiat currency. They are issued, as the name implies, by the nation’s central bank, which must maintain reserves against them. About 90 nations have at least looked into the technology, while nine have launched a CBDC, according to research by The Atlantic Council, a Washington, D.C.-based think tank
CBDCs may or may not be created through a distributed ledger like a blockchain. Some experts, however, argue there’s little to be gained in managing a national digital currency through the public/private key pairs generated via a blockchain.
