Ensuring Responsible Development of Digital Assets - this the title of Joe Biden's executive order on crypto assets. We have seen rumors that White House has been working on some sort of actions regarding cryptocurrencies have been going on for a while. It has finally happened and Biden has signed his executive order. There are mixed reactions to the executive order. Some say it is a good thing for crypto, so say government just should stay away from the crypto world. Regardless where you land, it is still a win for bitcoin when government officials of the highest ranks take serious steps to be involved in crypto-sphere.
You can read the full text of the executive order here. If you prefer shorter version, you may want to read this. It always amuses me how they give titles to bills and executive orders. So, they are actually interested in development? And somehow can help making the developments in crypto responsible. I doubt that. The hypocrisy of this title and the true reason becomes evident as soon as you read the first paragraph of the first section.
In November 2021, non‑state issued digital assets reached a combined market capitalization of $3 trillion, up from approximately $14 billion in early November 2016.
I am guessing by responsible development they mean, developing in a way that government can have its piece of the pie. Capital flow into crypto world has indeed taken then their attention, it does seem like this keeps growing fast and there is much can be done to stop the flow of capital and growth. Perhaps, it can be slowed down if need be. But in the end it is all about control. That's why I believe more appropriate title for this executive order would be - How To Control Crypto Assets Growth.
Forgive me to stat out with criticism without even going into the details of the executive order. Of course government can participate in the development of blockchain technologies and create positive environment that facilitate continuous development of such technologies too. They lie too many times, and that's why it is healthy to be skeptical.
Just like any other regulatory actions, this one too emphasizes the importance of protecting U.S. consumers, investors and businesses and encourages regulators to create an oversight for crypto. Good argument for a working oversight and clear guidelines in crypto has been made by many, that is regulated space would help traditional financial funds to be more comfortable in investing in crypto or at least allocate some of their investment portfolio to crypto assets. On the other hand it may create obstacles for retail investors who may choose to avoid crypto all-together due to uncertainties imposed by regulators.
The executive order echos the talks from others we have already seen, such as protecting U.S. and global financial stability and mitigating systemic risk. The intention of mitigating risks to the traditional financial system alone proves that this order has nothing to do with empowering and encouraging the development of the tech in this space.
Just like other central banks, international banks, and other governments have expressed a desire to build central bank digital currencies, this order too encourages research and development of potential United States CBDC. We have heard so many times about CBDC already this year. It does look like the only counter traditional financial systems protectors have against growing bitcoin adoption and crypto growth is creating CBDCs.
No wonder, throughout the order cryptocurrencies are referred as digital assets. This play of words is designed to misguide people on what bitcoin is, what crypto assets are. They are digital, they are assets. But that is not their important features. That is not their purpose. By classifying all crypto as digital assets, they can easily justify the use of CBDCs and present them proper competition to bitcoin and other crypto assets.
However, there is a huge difference between bitcoin and any CBDC. One is centralized and is decentralized. CBDC is a continuation of the same old system with a better technology. Bitcoin is a new revolutionary system and better technology. To put it in the words of Steve Wozniak, bitcoin is a pure-gold mathematics. And this can only be achieved by a decentralized network. Be design CBDCs can never be decentralized and are not necessarily a competition to bitcoin. When we just call everything as digital assets, we lose the important features and properties crypto assets in a truly decentralized network promise.
Not only this order directs US government to asses the technological infrastructure and capacity needs for U.S. CBDC and encourages Federal Reserve to research, develop, and asses U.S. CBDC efforts, but the order also directs participation in multi-country experimentation. In other words, it would be nice to develop CBDC and implemented in a way that it would function similar to USD today. It is not necessarily an innovation, but rather upgrading the current system with a better technology.
I welcome any development of CBDCs and making current system more efficient. But that doesn't make them better money. The protocol of the fiat money remains the same. I haven't seen anything that would suggest otherwise. Hence, this is win for bitcoin and crypto.