Yesterday, President Joe Biden issued an executive order regarding cryptocurrencies. To summarize the order, Mr Biden has asked heads of politically independent agencies like the Board of Governors of the Federal Reserve System and Federal Deposit Insurance Commission, etc., and ordered heads of certain cabinet agencies, like the Secretary of the US Treasury, to take a closer look at the impact of cryptocurrency design and deployment on six areas:
1.Consumer and investor protection;
2. Financial stability;
3. Illicit finance;
4. U.S. leadership in the global financial system and the country’s economic competitiveness;
5.Financial inclusion of marginalized consumer groups; and
6. Responsible technology innovation.
This is at least the spoken narrative, what I refer to as the “Madison Avenue” narrative; one that is designed persuade the electorate to come onboard with the President’s agenda. The electorate plays a crucial role as the political actor providing the primary source of votes every two years. A president’s primary power is that of persuasion and his message has to either win additional votes or at least secure the votes he has going into a general election.
I was taken aback not only by the executive order’s length but also by how weak a platform it provides for future political, policy, and legal action. From the political perspective, it fails to counter any arguments from the opposition. For example, Mr Biden makes nary an attempt to clearly address the philosophy of crypto proponents.
Proponents, especially bitcoin users, will tell you till blue in the face that using crypto is about wealth preservation. They see the US dollar as declining in wealth protection and spending value because of ineffective monetary and fiscal policies that have done nothing but send the dollar on a decline for the last fifty years. With a significant amount of the dollars printed by the central bank over the last forty or so years being printed in the last 24 months, proponents of bitcoin use believe they have a base case for seeking an alternative method for medium of exchange, store of value, and account of wealth.
Currency is about trust and according to the President’s own statistics, 16% of the nation is exhibiting some degree of trust in crypto as a payment system and store of wealth versus the dollar.
Mr Biden could have scored more points in the direct and honest department with a concise narrative bluntly stating that cryptocurrency is a clear and present danger to the US monopoly on the payment system that is used to sustain commercial transactions and collect taxes. This “Power Narrative” would better capture western philosophy: that the world is a place divided up in order to generate yield and the energy derived from dividing up and extracting from the environment is best captured and transferred in our current system of money and to maintain an orderly transfer of “monetary energy”, there can only be one issuer of the money: government. Unfortunately, such a brazen power narrative would not go over well with the electorate, thus forcing Mr Biden to throw in the usual feel-good concepts like “consumer and investor” protection.
Traders who want to include bitcoin in their portfolios when collateralizing loans should expect Mr Biden’s executive order to act as a green light for regulators seeking to increase their scrutiny of digital assets. Traders should also expect continued litigation over the use of digital assets.
In the short run as political narrative, Mr Biden’s executive order is a major fail. Sure, 16% of Americans may take an interest in the government’s approach to bitcoin, but as political narrative that should be designed to win votes, this executive order does not cut it. Most Americans are concerned about inflation and how their wages are being eaten into by increasing prices.
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Disclaimer: The above is provided for informational purposes and should not be construed as financial or legal advice or as creating an agreement to provide financial or legal advice.