If you heard a loud sigh out of nowhere recently, it might have been the entire crypto community letting out its breath after both the United States and the European Union opted not to impose new restrictions that could have hobbled the industry’s growth.
Before President Joe Biden released his much-anticipated executive order on cryptocurrencies on March 9, worries were rampant about what it might contain that could harm the industry, with some fearing that it could include major restrictions or perhaps even an outright ban on crypto while the government studied the issue further.
What the White House actually released was an order that merely instructed federal agencies to study the risks and benefits of crypto, to coordinate their regulation and to consider the possibility of a Central Bank Digital Currency. Any lingering fears that the government planned to barrel forward with new restrictions without fully considering their implications were therefore put to rest.
“Anyone worried that President Biden's executive order would spell doom & gloom for crypto can fully relax now,” Jake Chervinsky, head of policy at the Blockchain Association tweeted when the order came down.
“The main concern was that the EO might force rushed rulemaking or impose new & bad restrictions, but there's nothing like that here,” he said. “It's about as good as we could ask.”
Even though the order mostly just asked for more study and therefore did very little to illuminate what the ultimate regulatory decisions might be, the overwhelmingly positive reaction from the crypto community (and the fact that it sent Bitcoin prices up 8%) shows how much was considered to be on the line.
Former Andreessen Horowitz partner Katie Haun tweeted that the order was “a step in the right direction,” while the chief global policy officer at her new firm Tomicah Tillemann said it was perhaps a “breakthrough moment for democracy.” FTX CEO Sam Bankman-Fried was slightly less enthused, but called it “constructive.” Gemini Exchange co-founder Cameron Winklevoss, meanwhile, called the order a “watershed moment,” in a lengthy tweet thread discussing its impact.
“We believe crypto has the potential to improve our financial system in a way that helps grow our economy and protects the financial rights and dignity of every individual,” Winklevoss tweeted. “It’s great to see the White House acknowledging this.”
Meanwhile in the EU…
The fear in the U.S. was mostly based on speculation about what Biden might do in his order, but the threat in the EU was much more concrete. Members of the EU Parliament voted on whether to include language in an overarching framework for regulating digital assets known as the Markets in Crypto-assets legislation that would make all crypto traded “subject to minimum environmental sustainability standards.” These standards would not have allowed the proof-of-work consensus mechanisms used by popular coins such as Bitcoin and Ether.
If the measure had become law, it would have amounted to a ban on Bitcoin mining and transactions in the EU.
And many crypto advocates viewed it as an existential threat to all crypto in the territory. “if u think it stops w PoW you’re naive. they’re coming for all public blockchains - this is a political attack on financial freedom,” CoinShares chief strategy officer Meltem Demirors tweeted in the lead up to the vote.
The vote was considered too close to call before it took place, leading to much anxiety among the crypto faithful, but in the end the measure was defeated in committee in a 30 to 23 vote on March 14. An alternative proposal for regulating crypto without the de facto Bitcoin ban offered by parliament member Stefan Berger advanced instead.
Once again, crypto evangelists took a victory lap. “GOOD NEWS!” tweeted crypto influencer Lark Davis as soon as news of the vote broke.
While new regulatory frameworks for crypto are, of course, still being hammered out in both the U.S. and the EU, it looks like they’ll both be crafted from a point of view that recognizes crypto as an important part of the economy that isn’t going away.