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Looking at the US Executive Order on Crypto

This week you might have heard that the US was set to start taking a deeper look into regulating the cryptocurrency space. Here is a short explainer providing some background regarding the priorities of the executive order.

What are the goals of the Executive Order?

US President Joe Biden signed an executive order on March 9, 2022 in regards to cryptocurrencies, while noting that approximately 40 million Americans, or about 16% of American adults, have cryptocurrency holdings. They also noted that over 100 other countries have been exploring the concept of a CBDC (Central Bank Digital Currency), as digital versions of fiat currencies. The executive order will not impact the status-quo immediately, as instead of providing directives for how federal agencies should act, the order instead calls for agencies to prepare reports over various time frames ranging from several months to a year on how they think cryptocurrency impacts their respective domain (i.e. energy consumption for the EPA) and what regulations they think should thus come about.

In the related press release, the Biden administration specifically brought up its six primary concerns it hopes to address through the executive order:

  1. Consumer Protection
  2. Global Financial Stability
  3. Money Laundering
  4. Promote US Technology Competitiveness
  5. Financial Inclusion
  6. Responsible Innovation

What does this mean for the cryptocurrency space?

Regulation is not inherently bad news. While regulation can bring about more restrictions, they also provide clarity of rules and are a sign of legitimacy. Over the past decade, cryptocurrency and blockchain technologies have long had a notorious reputation as being used as the system of choice for illicit marketplaces such as the Silk Road, in addition to being utilized to take advantage of investors hoping to “get-rich-quick” through bogus initial-coin-offerings.

Over the past few years, the market has matured significantly with criminal usage of cryptocurrency now being a minor component of the ecosystem instead of being a dominant aspect. Despite this maturation there are still several aspects of common cryptocurrency usage that conflict with securities regulations in many countries, including the US. One of the most notable examples of this would be the proliferation of fractional NFTs. A security is fungible, and a NFT is by definition, not fungible, leaving the question of how could a NFT be considered a security? Fractional NFTs enable multiple individuals to purchase pieces of a NFT, and while the whole NFT is not fungible, the fractional parts are fungible – and thus a security. This is not dissimilar to the Masterworks art investing platform.

For those in the iGaming industry, we know from experience that having clear guidelines is preferable to operating in the gray market. When operating in a gray market, your services could be cut off at any moment – with no heads up – and to boot, you are now on that government’s radar as having skirted the rules, meaning it could be difficult to secure proper licensing in that jurisdiction in the future. Further, the iGaming industry is keenly aware of the benefits that regulation provides in removing public stigma. In the US, most gambling was treated as a criminal or degenerate activity for decades. Nowadays, betting odds from various operators are visible on nearly every broadcasted sporting event.

Ten years ago it might have sounded ridiculous to entrepreneurs and iGaming operators, but today you can legally own a casino or sportsbook that is focused on cryptocurrency users. Contact [email protected] to get started today.

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