Today, cryptocurrency investors enjoyed some respite from the punishing declines trending over the last three months. At the time of writing, major cryptocurrencies like BTC and ETH are approaching double digits percentage gains on the day. Even DOGE is having its day, up 7.5% at the time of writing. The reason for this wave of positive sentiment is a new executive order signed by U.S. President Biden.
The executive order has yet to be published on the official Federal Register site, but various heavyweight news sources have reported on the content of the disposition tables. A key detail in the executive order is that government departments, such as the Treasury Department and the Commerce Department, have been asked to assess the benefits and risks of cryptocurrencies.
These government departments have a number of investigations into "the future of money" to complete. More specifically, reports say they have been tasked to:
- Assess the benefits of creating a central bank digital dollar
- Assess the risks of creating a central bank digital dollar
- Consider the above two points while addressing cryptocurrency consumer protection, financial stability, illicit activity, US competitiveness, financial inclusion and responsible innovation
Because the government exists to work for the people, some of the most important things that will be considered regard customer protection. The crypto market is somewhat like the "wild west" right now, with frequent and multiple reports of hacks, scams, thefts – as well as crypto being a preferred payment choice for illicit goods or services.
On the flipside, if crypto is widely adopted by other countries, mainstream organisations and users, then the US doesn't want to close its doors to allowing its enterprises to build innovative products based on the tech. Just think if a country had stood in the way of credit cards, the internet, or other such innovations – how it might have hobbled its homegrown industries for years.
The above plans and investigations might sound positive for the cryptocurrency market today, on the whole, thus the rise market-wide. However, it could just be traders pumping up the positivity to make something from the breaking news. There has been a solid three months of cryptocurrencies down-trending – has the reason behind this fall from favor now gone? We don't think so.
If one looks a bit closer at the executive order details, the US government wants to consider more oversight and regulations than the crypto market has seen previously. Biden would like to see an "unprecedented focus of coordinated action" from federal agencies, to help clamp down on illicit use of cryptocurrencies, and international collaboration to reduce such issues.
With the Russian invasion of Ukraine in mind, authorities would also like to make sure these digital currencies aren't an easy escape route for rogue governments, sanctioned entities or individuals.
One of the finer points about cryptocurrencies being mined or used was raised by the U.S. president – the astronomical use of energy resources, largely due to the proof of work concept.
We have seen recent estimates peg the daily power use of the Bitcoin blockchain network as equivalent to a country like the Netherlands. With the current oil and gas crunch piling financial pressure onto consumers, it wouldn't be inconceivable for natural energy resource-poor regions to decide to put some limits on cryptomining activity. China has already implemented such a policy and has been seen enforcing it.