The growing popularity of cryptocurrencies has been making regulators apprehensive. While some countries, like China, are responding with bans and restrictions on cryptocurrency trading, developed countries are looking at a better regulatory framework. What are President Joe Biden’s views on cryptocurrencies and will he ban them?
The cryptocurrency market has seen an epic bull run from the lows of March 2020. The rally took many people by surprise. While the cryptocurrency market is attracting a new set of traders, which was pretty visible in Robinhood’s earnings report, volatility and increasing adoption are also making regulators apprehensive.
Joe Biden’s views on cryptocurrencies
Biden seems concerned about the risks associated with cryptocurrencies. Reportedly, he's mulling an executive order to enable federal agencies to analyze cryptocurrencies and devise appropriate regulations. Earlier this year, the IRS came up with regulations under which crypto transactions above $10,000 should be reported to the agency.
The Colonial Pipeline attack, where the hackers were paid in Bitcoins, also didn't go well with the Biden administration. The government retrieved most of the money that was paid as a ransom. After the attack, the Biden administration sanctioned cryptocurrency exchange Suex OTC for facilitating illicit transactions.
Biden's ransomware summit
This week, the Biden administration is holding a virtual ransomware summit with 30 countries, with the notable exclusion of Russia. The Biden administration has been trying to include allies whether it's about global minimum taxation or the growing cybersecurity threats.
Biden administration thinks that cryptocurrencies are risky
The Biden administration is cognizant of the risks associated with cryptocurrencies. “You’re really seeing the administration at the beginning of what we expect will be an ongoing, quite aggressive effort to make sure we understand and address the whole range of risks that we see in the cryptocurrency space,” said Peter Harrell, the senior director for international economics and competitiveness with the National Security Council.
The Biden administration is also looking to regulate stablecoins and is contemplating regulating them as a bank. Stablecoins are pegged to currencies like the U.S. dollar. While they bring the stability of fiat currencies, they also offer the benefits of digital assets.
Biden administration wants to tax cryptocurrencies
There seems to be a love-hate relationship between the Biden administration and cryptocurrencies. The administration might tax cryptocurrency transactions to raise funds for the infrastructure bill. Given the fact that the U.S., like most other countries, is woefully short of revenues, taxing cryptocurrencies looks like a good way to garner funds.
Will Biden ban cryptocurrencies?
Central banks and governments have good enough reasons to be apprehensive about the growing popularity of cryptocurrencies. The growing popularity of digital assets comes at the cost of the decreasing clout of fiat currencies. Currency is one function that governments don’t want to lose control of since they can use it as a tool to achieve financial objectives.
Given the massive market cap of cryptocurrencies, it looks highly unlikely that Biden would ban them. A ban would only mean that crypto transactions would move offshore, which would make it even tougher to track them. Stricter cryptocurrency regulations certainly appear to be on the table based on the recent comments from the Biden administration.