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Biden’s Executive Order on Cryptocurrencies: What Does it Mean for the Financial Industry?


The United States has taken a major step towards adopting a regulatory framework for the governance of digital assets, with President Joe Biden signing an Executive Order on Ensuring Responsible Development of Digital Assets in March of 2022.


The order tasks several government agencies with examining the risks, benefits, security, and responsible innovation of digital assets such as cryptocurrencies. The new executive order also calls for exploring and implementing a U.S. Central Bank Digital Currency (CBDC), if deemed to be in the national interest.


This is the first time the United States has formally weighed in on cryptocurrencies and other digital assets—a move that will likely lead to changes in the financial industry as we know it.


A Shift in Stance Towards Digital Assets

This order likely puts to rest any notion of a federal government ban on Bitcoin and other digital assets more broadly. Contrary to that notion, the Biden administration seemed to take a positive stance towards the opportunity the United States has to be a leader in innovation. The order even went so far as to praise digital assets for “making domestic and cross-border funds transfers and payments cheaper, faster, and safer.” Cryptocurrencies were also recognized for the opportunities they provide in banking underserved and low-income communities.


This change in stance is seen by many as the first step the federal government is taking towards issuing a CBDC, a move that would help ensure the U.S. dollar maintains its status as a world reserve currency. The White House seems to be recognizing that as the world becomes more digital, the dollar must as well, especially given the recently created digital yuan. And, with the White House now using the U.S. dollar as a foreign policy tool against Russia, the dollar is likely to face increasing threats to its dominance in the coming decades.


Some See Challenges, Others See Opportunities

Not everyone is happy with this seismic shift in tone from the White House. Rob Nichols, president and CEO of the American Bankers Association responded, “We urge the administration and the agencies involved to carefully consider the implications of a U.S. CBDC, which could fundamentally reshape our banking and payments system to the detriment of bank customers and their communities.” He echoes the concerns in the banking industry that a CBDC could lead to banks being cut out as intermediaries.


But where some see a threat, more forward-thinking financial institutions see opportunities.


One of the advantages decentralized finance (DeFi) has had over traditional finance (TradFi) is a lack of regulation. Biden’s watershed moment executive order is likely the beginning of the end for the “wild west” of crypto and DeFi. Those businesses operating in gray areas will soon find themselves subject to the same regulatory and compliance standards as found in the TradFi space.


Consumers will soon begin to face increased friction in onboarding and Know Your Customer (KYC) requirements with DeFi products and platforms, and as DeFi is held to similar regulatory standards and limitations, financial institutions who hold existing banking relationships with their consumers have unique advantages and opportunities.


Banks and credit unions that have largely been “stuck on the sidelines” will now be able to embrace and incorporate digital assets into their product offerings and ecosystems. Forward thinking financial institutions are beginning to explore new product offerings and services in crypto, Web3, and even in the Metaverse.


TradFi will soon be able to offer similar products and services that are currently only found in DeFi, but with the advantage that they can provide a smooth onboarding experience that allows consumers to stay within that existing banking ecosystem that they know and trust.


Financial institutions can also take advantage of their reputation as a trusted resource to educate and inform consumers and other stakeholders, especially on the topic of digital assets.

Capitalizing on these opportunities requires traditional financial institutions, who have resisted fintech, and now DeFi, to take an adaptive approach towards innovation and thought leadership in the digital asset space.


It is advantageous for financial institutions to be receptive to offering new products and services, and partnering with DeFi companies and platforms (that were once seen as a threat) to keep up with the rapidly changing banking landscape. 


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