Biden administration wants to ‘surround’ bitcoin before the crypto becomes too big

November 4, 2021 by No Comments

US authorities are preparing for more active surveillance of bitcoin and other cryptocurrencies. This is what Michael Hsu, who oversees the US banking sector on behalf of the Biden administration, said in an interview with the Financial Times. Hsu was named the so-called ‘Comptroller of the Currency‘, and is therefore jointly responsible for coordinating supervision of the banking sector.

Cryptocurrencies are such a new phenomenon for US authorities that they are often in danger of falling between two stools in the supervision of the financial sector. Moreover, it is by no means always clear which institution has which powers.

For example, not only does the Comptroller monitor, but also a variety of other institutions. The Commodity Futures Trading Commission (CFTC) oversees financial derivatives, such as futures contracts and options, which have already been developed for cryptocurrencies. The Securities and Exchange Commission (SEC) oversees the stock exchange and the banks – which in principle also include trading platforms for cryptos such as Coinbase. The Federal Deposit Insurance Corporation (FDIC) is responsible for maintaining public, including savers, trust in the financial system. And as the central bank, the Federal Reserve is primarily responsible for macroeconomic stability.

Regulating circle

Hsu wants a coordinated supervision of cryptos that should lead to what he calls a ‘regulatory circle’ (‘regulation perimeter‘) around cryptos. In this way, according to him, savers and investors should be protected against the supposed risks of cryptocurrencies. And the laundering of criminal money via cryptos must be prevented. Meanwhile, the Federal Reserve, the FDIC and the Comptroller already form a so-called ‘sprint team’ to be able to operate faster.

Hsu says he is in a bit of a hurry, because the developments surrounding the new phenomenon are moving so fast that regulators are lagging behind. He says he wants to intervene before cryptos are so big that this becomes too difficult. At the price of bitcoin on Monday, there is a value of just over 1,000 billion dollars (819 billion euros) in circulation. In April of this year, when the price peaked at $64,000, it was almost $2,000 billion.

The decline that has taken place since then is mainly the result of two developments. The Chinese central bank itself has already announced a regulatory offensive, while at the same time introducing its own digital currency that will remain under state control. And last month, well-known businessman Elon Musk suddenly turned his back on bitcoin because of the enormous environmental impact the energy-guzzling ‘mining’ of the currency makes. Tesla-branded cars, Musk said, will no longer be able to be paid for in bitcoin in the future, as was previously the plan. The cryptocurrency traded nearly $37,000 on Monday.