U.S. President Joe Biden has recently released an executive order pushing forward studies and development for digital assets.
Since its release, this had garnered attention and different opinions from the public. Most experts have greeted this as a possibility for better regulations and development of the digital asset industry.
But what does this exactly mean for the digital community and the current banking systems? Should we be expecting the long-waited American CBDC soon?
The Two Truths with Regulations
One major thing that many experts have observed from the executive order was the lack of any immediate policies and regulations. Rather, it contains long lists of call-for-action items for multiple branches of the government to operate and perform exhaustive studies from every aspect.
During the drafting period of the executive order, many had expressed scrutiny and concerns, thinking that this would involve excessive regulations that would hinder current digital transactions and activities. But in contrast, the report rather reaffirmed that cryptocurrency is here for us to embrace and deal with.
The executive order reflects how the U.S. is taking the right track for the digital industry, acknowledging its significance for America’s competitiveness in the financial market.
Instead of manifesting some kind of repression for the industry, we received an order directing agencies to responsibly identify issues and perform studies to outline necessary resolutions. This had apparently conveyed the Biden administration’s desire to harness the presented profits while securing a safe industry.
Many experts have previously called out that the U.S. should start mobilizing its arm s and draft regulations, given that digital assets are greatly taking over the financial sector. Given the amount of change crypto had caused, we should start minimizing any systematic risk as soon as possible.
The crypto market has been growing at a high speed, impacting our traditional financial systems. Based on multiple studies, these are some of the signs that a financial crisis is hitting a market. It is important that we invest in regulations to ensure minimal impact in case of any disruptions.
However, we should be cautious that together with certainty, the public also demands favorable regulations.
This is the exact reason why some experts have expressed concerns that actions from the U.S. government might cause regulatory issues the community might find too exhaustive, resulting in customers shifting to other countries with much more favorable policies.
Regulations while Securing Competitiveness
A quite major portion of the executive order leans towards sustaining the economic competitiveness of the U.S. market by ensuring efficient services while keeping up safe and well-regulated transactions.
However, in reality, things are much more complicated than mere words. There would always be the fear that one day, we might wake up with an industry regulated too tightly.
The Crypto industry was once a self-regulating business. However, in actuality, there would always be interventions from the government, one way or another.
Is the Internet a Trustworthy Foundation for this Critical industry?
Upon the release of Biden’s executive order, Thomas Vartanian, a writer, and a famous banking expert, remarked that most issues we encounter with digital assets are inherent from historical issues we have from the internet, which we are still trying to keep firm grip on .
In his books, Thomas had previously called out for a much more secure internet space. He mentioned that the lack of action over the last decades regarding the matter is alarming. Now, he is troubled by the apparent fact that more forms of digital assets, including CBDCs, will soon transition to the unsecured platform we have – that is, the internet.
As we progress with various studies on digital assets, we should expect that these types of concerns will be addressed. However, some financial veterans have given warnings that these explorations might give us results that are not as pleasing as we want. There are numbers of experts who are sceptical about how the digital industry would impact the overall financial sector, given the limitless number of things that could wrong.
Crypto has been here for more than a decade and we’ve been handling it well so far, however, an awful amount of loss would be ahead of us if we do not continue working with it smartly.
Biden’s Nudge for a U.S. CBDC
Although the recent executive order by the White House does not provide certain directives regarding the establishment of an American central bank digital currency or CBDC, its instructions are clear to mobilize federal agencies for further studies and preparations.
The report provides a noticeable sense of urgency towards CBDC and a clear prominence of the U.S. entering the competition. There’s quite an emphasis on the U.S. maintaining its global market leadership, which received different responses and opinions from the community.
Few banking institutions have expressed concerns on how their businesses would be impacted by creating a CBDC, specific to activities such as funding and lending.
Conversely, experts pointed out that the banking industry should not treat CBDC as a competition, but instead leverage it for further service development, given the number of roles private banks could take part in, once created.
The executive order clearly pushes forward the concept of an American CBDC, in relation to the notable slow progress of the Federal Reserves Board in terms of conducting studies. The Fed has been long waiting for a directive from Congress and the executive branch, and with this recent order by the President, we should expect the Fed to act and move forward.
Additionally, the order has provided instructions to the Justice and Treasury departments to perform necessary preparations for any legislative changes needed upon establishing a U.S. CBDC.
Although no words are set in stone, the executive order is an apparent nudge from the White House calling a huge sense of urgency for CBDCs.
Is Urgency for a U.S. CBDC Really Needed?
Although the U.S. government has called the “highest urgency” for CBDCs, the same is not shared by the rest of the community, as many emphasise the risks that this would cause in the traditional systems.
Some banking veterans pointed out that many from the financial sector have the misconception that faster and smoother transactions could only be attained through CBDCs. They expressed their concerns that the U.S. federal should look at the matter with a more careful approach given the huge role the U.S. dollar plays in the global financial market.
Although some other nations are getting ahead in terms of testing and pilots, specifically China with its e-CNY, some experts stated that this shouldn’t be an important consideration for the U.S.
Even though it might seem like this is China’s indirect attack to put the U.S. dollar down in the global market, experts mentioned that the U.S. shouldn’t confuse it for a need to rush and compete, without proper preparations.
What’s Next After the Executive Order
Although the executive order has clearly shown how the U.S government is leaning towards the creation of CBDCs, one thing that the community agreed on is the lack of any signs that the authorities favor any type of digital assets. So far, the mandate is clear that digital assets in general would be developed and studied.
The executive order has not shown any impact on the current business activities and no noticeable actions are taken by the digital community. The industry continues with its plans but should be more cautious as changes might come faster and sooner than expected.
This order is a good way to spark conversations as we go through the rapidly changing digital industry, however, we should expect that things would get rough once we go into details.
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