Is Crypto Regulation Coming?

Cryptocurrencies have taken it on the chin lately even more than stocks have. The price of Bitcoin is down by almost a quarter since the start of the month, and has roughly halved since its early November peak. Ethereum is even worse off, as are numerous other smaller coins. The selloff has wiped out more than $1 trillion of cryptocurrency market cap.

Up next for crypto could be a more concerted effort by the U.S. federal government to regulate the space, according to reporting by Daren Fonda, Barron's new Crypto and Finance Editor. A person familiar with the Biden administration's plans said that an upcoming executive order could tie regulation of digital assets to national security goals.

Here are the details from Daren:

The national security memorandum, expected to come in the next few weeks, would task parts of the government with analyzing digital assets and assembling a regulatory framework that covers cryptos, stablecoins, and NFTs, or non-fungible tokens, this person said.

'This is designed to look holistically at digital assets and develop a set of policies that give coherency to what the government is trying to do in this space,' the person said.

The State Department, Treasury Department, National Economic Council, and Council of Economic Advisers would be involved in the initiative.

Today, the Securities and Exchange Commission and the Commodity Futures Trading Commission are tangentially involved in crypto oversight, but disagreements over whether some coins should count as securities or not make that a tough task. Crypto exchanges and high-yield lending products are similarly in gray areas with no clear answers.

Congress has been holding hearings on digital-asset regulation and the Federal Reserve has studied forming a central-bank digital currency, or CBDC. It's at best a patchwork approach to crypto oversight.

Outside the U.S., governments' approaches to cryptocurrencies range from El Salvador's, which has adopted Bitcoin as legal tender, to China's, which has banned them outright. Hopefully the U.S. falls somewhere in between.

Read more of Daren's reporting here.