Biden Moves To Regulate Bitcoin

By Marcus Sotiriou, Analyst at the UK based digital asset broker GlobalBlock  BLOK

Bitcoin BTC/USD managed to outperform the S&P 500 over the course of the past week, despite fears surrounding the Federal Reserve raising rates in response to high inflation. Even though the Federal Reserve Chairman, Jerome Powell, was hawkish at the FOMC meeting last Wednesday, $670 million of Bitcoin was removed from exchanges the next day, as whales continue to buy in this price range. It is important to note, however, that Powell made it clear that supply chain issues are indeed prominent, meaning that global markets may remain fearful going into the first-rate hike planned for March 16th.

The IMF (International Monetary Fund), consisting of 190 countries and are useful in providing loans to member nations in need of a bailout, have urged El Salvador to remove Bitcoin as legal tender. The IMF cite risks regarding “financial stability, financial integrity, and consumer protection”. They also have previously told El Salvador that their actions could prevent the country from getting a loan from the institution. However, it seems that El Salvador may not need the coercive loans from the IMF any longer by issuing the innovative the Bitcoin Bond, which allows them to raise funds to set up mining infrastructure. The IMF may be fearful of the rise of Bitcoin’s increasing global presence, as other Latin American countries are rumoured to be adopting Bitcoin as legal tender themselves.

What does Biden’s Executive Order on cryptocurrency mean for adoption in the United States?

Regulation concerns arise as the Biden administration prepares to release an executive order in February to regulate Bitcoin as a matter of "national security". The concerns that are likely to be highlighted are Bitcoin’s impact to the U.S. dollar as global reserve currency, difficulty in tracking wealth for taxation purposes, Bitcoin’s use in ransomware, and the lack of legal liability for DAOs (Decentralised Autonomous Organisations). As there are many people in positions of power in the U.S. government with conflicting views on Bitcoin, it is hard to predict whether this executive order will have a positive or negative impact on the industry.

Last week, many politicians of various states in the U.S. made headlines regarding plans to incorporate Bitcoin. Arizona Senator, Wendy Rogers, introduced a Senate bill to make Bitcoin legal tender. We will find out soon if this bill is passed through, which would be a catalyst for other U.S. states to follow suit, but I expect this proposal to face a lot of resistance.

In addition, all three Texan Gubernatorial candidates have expressed interest in Bitcoin. The incumbent Governor Abbott has made several pro-Bitcoin decisions and is now offering Bitcoin mining as a solution to the Texan power grid problem.

Furthermore, the Chairman of the Mississippi Senate Finance Committee, is introducing a bill to recognise Bitcoin in the Mississippi state code, which is the fourth bill submitted by Harkins that fit cryptocurrencies and Bitcoin into the state’s legal structure.

Whether the motivations of these politicians could be questionable, the fact that Bitcoin is a part of the dialogue at all levels of government shows how far Bitcoin has come over just 13 years of existence. I expect every politician to have to take a stand on Bitcoin in the not-so-distant future.