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Today's winner:Biden Officials Reportedly Discuss ‘Gaps’ In Cryptocurrency Rules In Response To Wild Price SwingsPalash Ghosh
The Biden administration recently met with other government officials, including staff members at the Treasury Department, to discuss the risks presented by the extreme volatility in cryptocurrency markets, the Washington Post reported on Tuesday, and how to prevent illicit activities that use crypto.
The White House has also discussed the matter with the Treasury department’s Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, although these talks did not include most senior-level officials like Treasury Secretary Janet Yellen, two unnamed individuals told the Post.
Biden officials are reportedly looking at possible “gaps” in oversight of the crypto market, and whether such gaps might be exploited to fund illicit or terrorist activities, the Post reported.
They also discussed possible ways to protect retail investors who want to purchase cryptocurrency.
Although federal regulators don’t currently believe the massive swings in crypto prices pose a threat to overall financial market stability, they contend such risks are worth monitoring, the Post noted.
Forbes has reached out to the White House, Treasury Department and the CFPB for comment.
“[Federal officials are] aware of the fact that there are all kinds of risks [related to crypto] in the abstract and things to look out for, but they are still largely in a wait-and-see posture,” an unnamed person briefed on the discussions told the Post.
Last week, the Treasury Department revealed a plan to raise $700 billion over the next 10 years to help fund Biden’s $1.8 trillion American Families Plan which included new tax enforcement provisions that seeks to put pressure on cryptocurrencies, crypto asset exchanges and crypto payment services to report transactions to the Internal Revenue Service in order to uncover unreported income or to detect incidences of tax evasion, money laundering and other illicit activities. The plan would also compel businesses to file a current transaction report if they receive cryptocurrency valued at more than $10,000 (as they are currently required to report cash payments above $10,000). Meanwhile, Bitcoin, the largest and most popular cryptocurrency, traded at around $38,000 on Tuesday at 1:20 p.m., a 36% plunge from May 9, partly due to worries about Chinese regulatory crackdowns on cryptocurrency transactions as well as comments made by Tesla chief Elon Musk about the climate impact of mining Bitcoins. Bitcoin hit an all-time high of almost $65,000 in mid-April.
Luke Lloyd, wealth advisor and investment strategist at Strategic Wealth Partners in Independence, Ohio, told Forbes that government regulation of crypto markets isn’t “necessarily a bad thing” as long as it doesn’t completely ban cryptocurrency. But he cautions that regulation can kill innovation, and could restrict the free markets from working properly. “In the end, the issue of volatility in the cryptomarkets will fix itself if cryptocurrency becomes what it’s supposed to, at least for the larger coins like Bitcoin and Ethereum,” he said. “As more players and money get involved with Bitcoin and Ethereum, the market cap will rise. As the market cap rises, volatility will shrink.”
$1.63 trillion. That’s the current total market cap of the entire crypto market, according to CoinMarketCap, however that figure has dropped about 36% from a peak of about $2.53 trillion in early May.
On Monday, Federal Reserve board governor Lael Brainard promoted the idea of a cryptocurrency backed by the central bank, saying it would, among other things, help to provide financial services to the 20% of Americans who are “underbanked.” In a speech at a conference presented by Coindesk, a crypto news site, she said: “We must explore, and try to anticipate the extent to which households’ and businesses’ needs and preferences may migrate further to digital payments over time.” She added that a digital dollar would be a “new type of central bank money issued in digital form for use by the general public.” Last week Fed Chairman Jerome Powell said the central bank plans to release a working paper this summer on the various facets of central bank digital currencies, suggesting the Fed is getting serious about the matter.
Allianz chief economic adviser Mohamed El-Erian warned on Monday that volatility is likely to be a permanent feature of cryptocurrencies. “I think the volatility will continue,” he told CNBC. “The roller coaster, the up and down. We’ve traded in the $30,000 to $44,000 price range [for Bitcoin] in a week, that’s enormous.”
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