White House Kicks the Can Down the Road on Crypto Guidance

An analysis by Barron’s of the White House’s reports on crypto confirms that it’s a lot of sizzle and no steak. Earlier this month the Biden administration released a series of reports on crypto that was supposed to be the “first-ever comprehensive framework for digital assets.”

While there are more than 200 pages of reports from three cabinet departments – Justice, Treasury and Commerce – there is no clear regulatory guidance, just an identification of potential problems and a call for more study.

The Financial Stability Oversight Council will be producing an outline by early  October addressing “specific financial stability risks and regulatory gaps posed by various types of digital assets” but that still leaves the industry with more questions than answers.

…In more than 200 pages from agencies including the Treasury and Commerce Departments, the administration addressed crypto’s use in payments, criminal activity, and speculation. Pursuant to an executive order issued by President Joe Biden in March, agencies analyzed everything from the environmental impact of crypto miners to the risks posed by stablecoins whose reserves include U.S. Treasuries among other assets.

…

The reports “do not actually create a comprehensive framework, but do identify opportunities and risks (with a focus on the risks) across the digital asset ecosystem,” wrote Bank of America strategists Alkesh Shah and Andrew Moss in a note on Thursday.

The White House notes there are still more reports to come. Biden’s executive order tells the Financial Stability Oversight Council, a group of U.S. agencies that monitors risks to the financial system, to produce a report by early October outlining “specific financial stability risks and regulatory gaps posed by various types of digital assets.”

An administration official told Barron’s that per the order, “the report that is most key toward specific recommendations and identifying regulatory gaps is the forthcoming FSOC report.”

As for the reports that have already been released, “I do think that we took some pretty important steps in the report in really focusing on the need for prudent regulations on cryptocurrencies,” the administration official said.

Part of the White House’s lack of clarity likely stems from a lack of control. The two agencies with the most power over the crypto markets—the Commodity Futures Trading Commission and the Securities and Exchange Commission—can write their own rules without taking direction from the president.

“Those agencies are independent, which means the White House cannot order them to do anything,” wrote Cowen analyst Jaret Seiberg in a note.

Some fundamental questions, such as whether crypto tokens should be subject to laws governing securities or commodities, might eventually need to be decided by Congress.

But even with those caveats, the White House for the most part didn’t express strong views on most of the hot-button issues.

“The reports seem to kick the can down the road—we don’t see clear recommendations. Those we do see seem to have an outdated and unbalanced understanding of the technology,” said Crypto Council for Innovation CEO Sheila Warren in a statement after the reports were released.

We don’t expect much of Washington, but after six months with three cabinet-level departments working on this there should have been more.