Crypto markets have been going through a rough 2022 so far. With inflation concerns, war, and possible regulations, people holding crypto have felt that the market has been more like a game slot online where they could potentially lose all their money. Bitcoin, which is down from its all-time high of $69,045 in November of last year, has been the most volatile crypto on the market in 2022. While Bitcoin is up from its previous low in 2022, it still hasn’t made it back to its all-time high from last year.
President Joe Biden’s executive order that was announced on Wednesday can add more volatility to a crypto market that has been hard for experts to pin down this year. The order is set to have the United States government put a closer eye on the risks and benefits of cryptocurrencies in America. Shockingly, cryptos like Bitcoin shot up 9% on an overnight statement by the U.S. Treasury on Tuesday ahead of the Biden executive order, a statement that the Treasury would quickly delete but repost later on Wednesday.
There are six critical areas of note that this executive order will focus on: consumer and investor protection, financial stability of cryptos, illicit activities involving cryptos, financial inclusion, responsible innovation in cryptos, and U.S. competitiveness on a global stage against cryptos. These six things didn’t outright discuss a precise regulation of cryptocurrencies, which might be why the crypto markets didn’t crash on this announcement. However, Treasury Secretary Janet Yellen has said before that she would like to see Congress act on stablecoins with regulations in that sector.
Responsible Innovation in Crypto: How the Biden Administration is Looking At Environmental Impacts of Crypto
Whenever the environment and cryptocurrencies are in the same sentence, people point at Bitcoin, which uses the most electricity to mine. Bitcoin’s environmental impact on the world has made it a critical part of many discussions regarding the actual value and use of Bitcoin. The Biden executive order mentioned the energy costs that cryptos like Bitcoin have incurred worldwide.
Bitcoin mining uses so much electricity due to the computing power needed to mine for Bitcoin. Having more computing power gives the Bitcoin miner a higher chance of being rewarded with new Bitcoin in the mining process. The process is on a decentralized network of computers that solve complex mathematical puzzles to successfully mine Bitcoin, with the person with the highest computing power getting an edge on solving the puzzle first.
These high-powered computer networks have led to large amounts of power consumption wherever there are Bitcoin miners. With China banning crypto mining altogether, the miners have looked to other countries to continue their operations. Some have looked to establish their crypto mining operations here in the United States, which is why the Biden executive order has made the environmental impact of cryptocurrencies a critical point.
The Digital Dollar: What is Biden Looking at with a CBDC
One of the lesser-known things in Biden’s executive order was his stance on a digital dollar. While nothing in the order has outright said anything about the launch of a digital dollar, he has indicated that the U.S. government should put “urgency” on the research and development of a possible Central Bank Digital Currency (CBCD). The CBCD would most likely be competing with other CBDCs on the market like Japan’s digital yen and China’s digital yuan, both of which are set to be in full swing in their country in 2022.
The Federal Reserve has been exploring this option since last year and is expected to make some type of announcement on a CBCD in May 2022. While the Fed has been gauging the public’s reception of a CBDC, they also noted that any CBDC would need to go through Congress, which failed to pass a bill on a digital dollar in 2020 when Democrats added it in part of a COVID-19 aid package. With Democrats controlling both chambers of Congress currently, along with the Presidency, people will have to see if Congress will act on a CBDC after the Fed meeting in May and along with what has been mentioned in Biden’s executive order.