In a statement about the dangers of cryptocurrencies, the White House cited the various market crashes of the previous year.
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The narrative: “A tough year”
Last week, the White House published a “roadmap to mitigate the risks associated with cryptocurrencies” that was signed by (current) National Economic Council Director Brian Deese, Director of the White House Office of Science and Technology Policy Arati Prabhakar, Chair of the Council of Economic Advisors Cecilia Rouse, and National Security Advisor Jake Sullivan.
Why it matters
The statement shouldn’t come as much of a surprise on its face. In fact, the cryptocurrency industry had a tough year in 2022. Our court database fees have skyrocketed simply by trying to keep up with the various companies that have declared bankruptcy, as I wrote in a previous issue of this newsletter. However, in comparison to President Joe Biden’s March executive order on cryptocurrencies, the statement kind of suggests a more cautious approach to cryptocurrencies.
Breaking it down
The statement began with a brief summary of “a tough year” for crypto, mentioning Luna’s and FTX’s collapse but noting that the crypto industry did not appear to have spread to the wider financial ecosystem.
The official stated, describing the strategy as “dual tracked,” “We’re hopeful that Congress will take strong action addressing needs in this space, but we’re continuing to push forward on the administrative front, implementing a lot of the [executive order] recommendations and encouraging regulators… to continue their efforts to ramp up enforcement and crack down on bad practices in the space.”
The official said that the White House’s own efforts would focus more on issues like putting the executive order’s recommendations into action and cited legislative actions like Sherrod Brown’s letter to Treasury Secretary Janet Yellen from the Senate Banking Committee regarding crypto regulation.
The statement from last week made reference to previous announcements made by the White House, such as the framework on digital assets, and statements made by departments of the federal government, such as a joint statement from bank regulators that was also made public last week.
However, the events of the previous year demonstrate that more is required. The spread of false or misleading claims about crypto assets being insured by the FDIC is one example of how agencies have increased their efforts to combat fraud. In addition, the statement stated, “Enforcement agencies are devoting increased resources to combating illicit activities involving digital assets” while the United States is already a global leader in the fight against money laundering and terrorist financing.
The statement’s final paragraph began with a reiteration of the author’s concern about the need for safeguards and ended with a line about supporting responsible innovation, which we had previously heard.
“I think that in light of what happened in the fall, we were very aware of the need to implement many of the safeguards that were recommended in the FSOC reports, such as segregating customer assets, increasing visibility into vertically integrated businesses, reducing conflicts of interest, addressing spot market jurisdiction, and a long list of other things. The official added, “But I think they’re all part of how we make sure we’ll be protecting consumers and supporting financial stability.”
Upcoming hearings
Next week is going to be busy. There will be four bankruptcy hearings, a hearing on Sam Bankman-Fried’s bond conditions, and Celsius’ bidding. Here’s what we’re watching.
Monday
14:30 UTC (9:30 a.m. ET): FTX Bankruptcy Hearing – Appointment of Examiner
16:00 UTC (11:00 a.m. ET): Genesis Bankruptcy Hearing
19:00 UTC (2:00 p.m. ET): Celsius Bankruptcy Hearing
Wednesday
15:00 UTC (10:00 p.m. ET): Celsius Bidding Date
18:00 UTC (1:00 p.m. ET): FTX Bankruptcy Hearing
Thursday
15:30 UTC (10:30 a.m. ET): Sam Bankman-Fried Bail Hearing
