On Wednesday, March 9, President Biden issued an “Executive Order on Ensuring Responsible Development of Digital Assets” (hereinafter “EO”). The EO outlines a wide-ranging strategy to assess the risks and potential benefits of digital assets (also known as cryptocurrencies) and their underlying technology. The EO signals that the White House is interested in taking a proactive and coordinated approach to crafting a more robust regulatory and legislative framework for cryptocurrencies. Implicit in this is a recognition that cryptocurrencies are here to stay. The EO indicates that the White House is accepting cryptocurrencies, just as the major traditional financial institutions reluctantly did. As comprehensive as it is aspirational, the EO seeks to promulgate a national policy for digital assets with the objective of achieving seven major goals: consumer and investor protection; financial stability; curbing illicit finance; U.S. leadership in coordinating digital asset regulation; financial inclusion; responsible innovation; and exploring the viability of a U.S. Central Digital Currency (CBDC). Despite its lofty goals, the EO here does not actually establish new regulations for, or instruct federal agencies on how to regulate cryptocurrencies. As a result, there is not much, if anything, for those concerned about aggressive government intervention to challenge at this point.
By way of background, an executive order is a directive issued by the President of the United States, acting in his capacity as head of the executive branch, compelling a federal official or agency to engage in, or refrain from, a particular course of action. But this EO does not direct any federal agency to take any immediate actions with regard to cryptocurrencies or cease any ongoing efforts around cryptocurrencies; instead, the EO, which purports to utilize a novel “whole-of-government” approach, merely requires numerous federal agencies to coordinate with each other to study and report on various facets of cryptocurrencies and to recommend follow-up steps for regulatory and legislative action. The EO calls for numerous different interagency reports, assessments, and evaluations, and sets deadlines for these action items, which range from 90 days until 365 days after the issuance of the EO. Although the EO ultimately may set in motion activities that lead to federal agencies promulgating additional regulations concerning cryptocurrencies, the EO does not change the regulatory landscape for cryptocurrencies at this time. Nor does it guarantee that the regulatory landscape for cryptocurrencies will change in the future.
Additionally, the EO appears to direct some federal agencies, but not others, to take a more prominent role in the regulation of cryptocurrencies. For example, the EO directs certain federal officials and executive agencies to take specific actions, e.g., § 5(b)(ii)–(iii), whereas the EO merely requests that certain other agencies consider action, see e.g., § 5(b)(iv)–(vi). This distinction does not suggest that the EO is carving up federal responsibility to regulate cryptocurrencies but reflects the degree to which the President can influence and control policymaking by federal agencies. The President has the authority to direct traditional executive branch agencies, such as the Treasury Department, to take particular action. But the President does not have that authority over independent federal agencies, such as the Securities and Exchange Commission (“SEC”) and the Commodities Futures Trading Commission (“CFTC”). Because they are insulated from Presidential control and influence, the President may only request—not direct—that the independent federal agencies take particular action.
So the fact that the EO asks the SEC and the CFTC to consider, rather than take, action does not imply anything about their authority to regulate cryptocurrencies or their roles in the regulatory landscape. Indeed, the independent federal agencies already are active in regulating cryptocurrencies, through rulemaking and enforcement actions. See, e.g., In the Matter of: Payward Ventures, Inc. (d/b/a Kraken) Respondent, 2021 WL 4501468, CFTC Docket No. 21-20 (Sept. 28, 2021) (CFTC issuing an order, filing and settling charges against respondent Payward Ventures, Inc. d/b/a Kraken for offering margined retail commodity transactions in cryptocurrency—including Bitcoin—and failing to register as a futures commission merchant); Securities and Exchange Commission, Amendments to Exchange Act Rule 3b-16 Regarding the Definition of “Exchange”; Regulation ATS for ATSs That Trade U.S. Government Securities, NMS Stocks, and Other Securities; Regulation SCI for ATSs That Trade U.S. Treasury Securities and Agency Securities, Release No. 34-94062, File No. S7-02-22, (Jan. 2022) (proposing to amend Exchange Act Rule 3b-16, which, if adopted as proposed, could sweep in currently unregulated blockchain-based cryptocurrency platforms and subject them to all of the regulatory requirements that flow from being an exchange); Rep. of Investigation Pursuant to Section 21(a) of the Sec. Exch. Act of 1934: The DAO, Release No. 81207 (July 25, 2017) (SEC issuing report concluding that tokens offered and sold by a “virtual” organization known as “The DAO” were securities and therefore subject to the federal securities laws.); Statement of CFPB Director Chopra on Stablecoin Report (Nov. 1 2021), (noting that CFPB is “actively monitoring and preparing for broader consumer adoption of cryptocurrencies.”). Undoubtedly, the independent agencies will continue to take a prominent role in regulating cryptocurrencies but will look to the EO for guiding principles.
Britt Whitesell Biles is a Partner in the Business Litigation Group at Womble Bond Dickinson (US) LLP and a member of the Firm’s White Collar and Investigations team. Dwayne Sam is Of Counsel in the Firm’s Business Litigation Group. If you need assistance analyzing the EO or its likely impacts on federal agencies, please do not hesitate to contact the authors. Britt Whitesell Biles is reachable at (202) 857-4484 or firstname.lastname@example.org, and Dwayne Sam is reachable at (202) 857-4445 or email@example.com.