The Biden administration is seeking to place more regulatory guardrails on the $1.7 trillion cryptocurrency industry in wake of the collapse of FTX—formerly the fifth-largest cryptocurrency exchange. 

Before FTX’s collapse, the White House published a report on regulating cryptocurrency stemming from a March 2022 executive order entitled “Ensuring Responsible Development of Digital Assets.” The report proposed several recommendations: upending existing frameworks that underpin cryptocurrency (proof-of-work (PoW) to alternatives (proof-of-stake (PoS)); exploring the development of a U.S. Central Banking Digital Currency (CBDC); and tracking digital assets’ environmental outputs.  

Recently, White House advisors jointly published a “roadmap” to mitigate cryptocurrency risks going forward: 

The Administration wholeheartedly supports responsible technological innovations that make financial services cheaper, faster, safer, and more accessible. Yet to realize these benefits, new technologies need commensurate safeguards. Safeguards will ensure that new technologies are secure and beneficial to all—and that the new digital economy works for the many, not just the few. To put the right safeguards in place, we will keep driving forward the digital-assets framework we’ve developed, while working with Congress to achieve these goals.
Brian Deese, Arati Prabhakar, Cecilia Rouse, and Jake Sullivan

Mostly false or misleading. Significant errors or omissions. Mostly make believe.

The White House and some U.S. lawmakers will respond to the FTX implosion with calls for new, onerous legislation alongside strict regulation of digital currencies. But such a response would exacerbate the problem. 

Any adoption of legislation must take into account the reality that oppressive rulemaking will inevitably force investment in and development of crypto overseas.

Currently, the Security and Exchange Commission (SEC) and the Consumer Financial Protection Bureau do not have the authority to regulate crypto assets. Instead, they have been regulating the industry through enforcement actions. 

Regulating cryptocurrency exchanges as traditional financial institutions will leave the industry susceptible to fraud, illiquidity, and insolvency. Instead, legislation must foster a regulatory environment for crypto users to maintain independence and secure their own digital wallets. Self-custody is key to decentralization. 

Already, centralization fears have led users to seek crypto exchanges elsewhere and, unfortunately, settle for unvetted, questionable centralized exchanges outside the U.S. This was the case with FTX—the “popular” Bahamas-incorporated centralized exchange touted by social media influencers and mega-celebrities like Tom Brady and Gisele Bundchen. 

Compared to centralized protocols, decentralized blockchain technology—including public blockchain—is far more transparent and publicly viewable than centralized alternatives. 

Harvard Business Review argues decentralization insulates digital currencies from economic downturns and allows them to effectively weather market insecurity and instability—conditions that befell FTX and precipitated its demise.

While smaller than centralized exchanges, decentralized protocols typically offer more transparency and stability compared to opaque, centralized institutions like FTX. This is because the latter is designed to confuse customers about the risks they take when transferring assets between platforms. The attractive deals centralized platforms supposedly offer are too good to be true as they are inherently risky and unstable. 

Compared to centralized exchanges, decentralized blockchain technology will prevent future instances of abuse without a whole-of-government approach. They are more trustworthy and secure with crypto transactions since they lack a centralized authority. Due to this, the blockchain structure’s uses can extend beyond cryptocurrencies to voting and healthcare, for example.

Lawmakers would be wise to view Bitcoin like our nation: 50 unique states bound together by cooperative federalism. 

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