President Biden signed an executive order last week directing the Treasury Department to examine the benefits and risks of cryptocurrencies, as well as to develop policy recommendations on the economic impacts of a digital dollar.
This is a big deal whether you invest in crypto or not. Why?
Just last spring the Treasury Department announced regulations requiring any crypto transaction of $10,000 or more must be reported to the IRS. At the time, Treasury estimated that $600 billion a year in unpaid tax obligations were generated from the crypto market, including capital gains on crypto holdings. That figure has likely only risen since then.
With the executive order, the U.S. is joining governments from around the world which are exploring a sovereign digital currency. Digital currencies have launched in the Bahamas and Nigeria, while Sweden and China have active digital pilots. China has also banned crypto related activities and vows a harsh crackdown.
While the U.S. order will focus on six key areas- Consumer and investor protection, Financial stability, Illicit activity, U.S. competitiveness on a global stage, Financial inclusion, Responsible innovation- there are many moving pieces to the puzzle that is the digital dollar. Concerns about the introduction of digital dollars includes government tracking of purchases and transfers, as well as the huge (and growing) amount of energy currently required to produce, or mine, cryptocurrencies.
Let’s touch more upon the concerns… a main reason why crypto has proven popular with (especially early) investors is fear of currency. Governments, ruled by politicians, they say, cannot be trusted… they overspend, pile up debts and make currencies unstable. If the government now controls cryptos, it may only exacerbate the concerning fiscal habits. The desire to own assets that are not subject to political manipulation is the point. So, why would a crypto investor who is trying to avoid political manipulation want to buy a government-issued crypto currency?
Crypto reporting requirements last year… an executive order examining risks/rewards this year… what’s next for the premise of an official digital dollar in the U.S.? Take a look at this article and let me know your thoughts!
~ Brian Kasal- The Leadership Matrix
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