Now that President-elect Joseph R. Biden takes office, a number of financial and policy analysts are predicting some big policy changes for the financial world over the next four years.
With the increasing popularity of cryptocurrencies and the proliferation of financial technologies, it seems inevitable that crypto and fintech will be in the crosshairs of US regulators.
Background: What is the Biden administration expected to do on the first day?
The new administration already has a number of plans to make policy changes on day one. abc news reported that from day one of his tenure, Biden will use “the power of his pen” to bring about “a major transformation of US policy through dozens of executive orders, presidential memoranda and other official guidelines.”
While many of the immediate Executive Orders are aimed at tackling the national COVID-19 situation and removing some of the Trump-era restrictions on immigration to the United States.
As a result, fintech and crypto may not be high on the Biden administration’s priority list when it comes to acting quickly.
However, beyond the first day, week, or even year in office, the Biden administration is expected to make a number of transformative policy decisions for the United States. While the lethality of COVID-19 is an imminent problem that needs to be addressed, the societal impact of the virus will continue well beyond the pandemic itself.
A new financial paradigm has emerged in the past four years
In the financial world, COVID has taken a decisive step towards digitization (or “fintech”) of everything.
Cash usage fell sharply in the US and abroad as quarantine orders were placed. Financial companies that previously provided personal services were forced to expand their digital service offerings even further. In addition, the U.S. government called on a number of fintech companies to help distribute federal aid to individuals and small businesses whose incomes have been negatively impacted by COVID.
Additionally, 2020 brought massive amounts of quantitative easing and stimulus programs to the US and other parts of the world to pump adrenaline into COVID-hit economies. While the full effects of this QE are unlikely to be felt for some time, a number of analysts have warned that widespread inflation is imminent.
Perhaps this is one of the reasons why the year of the pandemic was the year Bitcoin managed to break its all-time high and gain unprecedented international attention and usage. In addition, 2020 was the year of “DeFi Summer”, in which the decentralized financial world made significant progress in terms of growth and usage.
What regulations could the Biden administration bring into the fintech and crypto space?
Changes in monetary policy indirectly promote Bitcoin and other crypto markets
As for the direct impact on the cryptocurrency space, one of the biggest impacts of the Biden administration may come from laws that are not directly related to crypto at all.
Andrew Kiguel, CEO and co-founder of Tokens.com, told Finance Magnates: “Biden announced a $ 1.9 trillion stimulus package. A big driver behind Bitcoin prices and crypto is fears that the US has printed too much money in response to COVID. “
“In 2020 over 30% of the US dollar was in circulation,” said Kiguel. “This proposed economic stimulus package increases this money pressure and more is to come. This will result in investors being moved from the US dollar to alternative areas like bitcoin and gold that hold better value. “
Crypto-Friendly Cabinet Picks?
Andrew Kiguel pointed out that some of Biden’s cabinet elections could be more crypto-friendly than previous members of the U.S. presidential administration when it comes to making policy decisions more directly targeting crypto and fintech.
“Gary Gensler was named Biden’s choice for chairman of the US Securities and Exchange Commission (SEC),” said Kiguel. “He is a Wall Street veteran with a thorough understanding of the cryptocurrency space. This could lead to the approval of long-awaited Bitcoin ETFs and crypto-friendly regulations. “
“The previous SEC chairman was less crypto-friendly,” he added.
However, there are still some unknowns when it comes to appointing key figures in the US financial landscape.
Josh Gilbert, market analyst for eToro, the global multi-asset investment platform, advised Finance Magnates that “since Biden has not yet announced the chairman of the Federal Reserve, we will have to wait to get a better understanding.”
“However, it is likely that Jerome Powell will remain the federal chairman and this will likely continue accommodative monetary policy,” Gilbert said. “This will also go well with the aggressive fiscal policies proposed by Biden Treasury Secretary Janet Yellen.”
Could we see a “digital dollar” soon?
Another shift that appears to have been accelerated by COVID-19 is the global movement towards the creation of digital currencies, or central bank CBDCs.
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In an interview with Finance Magnates earlier this week, CoinShare’s investment strategist James Butterfill said, “What we saw during COVID-19 is a massive move towards cashless societies that many central banks have really given the CBDCs to. “
“They are much more committed to this than they have been in the past,” he said, adding that Bitcoin’s growing popularity could put additional pressure on CBDCs.
In addition to China (which is currently actively testing the digital currency project launched a few years ago), other countries have announced plans to introduce digital currencies.
For example, towards the end of 2020, the Bahamas became one of the first countries in the world to officially launch a CBDC known as the “sand dollar”. The governor of the Lebanese central bank recently said the country was preparing to adopt a digital currency in 2021. In addition, the European Central Bank (ECB) published a report on the issuance of a CBDC in October.
“I’m sure the Biden administration will investigate a CBDC.”
With all that said, the United States may not be interested in developing a “digital dollar” anytime soon. The concept of the “digital dollar” was briefly mentioned in an early draft of one of the COVID stimulus packages in early 2020, but the idea was quickly dropped in favor of shorter-term solutions for stimulus distribution.
“It doesn’t seem likely,” said Ankit Bhatia, co-founder and CEO of Sapien.
“We don’t see any discussion of the CBDCs in democratic circles, and the leaders of Congress are closely tied to the banking industry, which would probably be fighting like the devil against something similar,” he told Finance Magnates.
Others, however, are more hopeful. Anthony Dernier, CEO of commission-free stock trading platform WeBull, told Finance Magnates, “I’m sure the Biden administration will investigate a CBDC.”
“The Fed is already conducting research into distributed ledger technology and the potential for digital currencies,” he said.
Furthermore, Dernier added that developing a CBDC or any other monetary policy shouldn’t be a partisan effort. “Presidents don’t do monetary policy. The Federal Reserve does,” he said. “The work of the Fed should be independent of government influence or political pressure.”
“The President proposes and Congress passes fiscal policy. The most important fiscal policy we can expect is the $ 1.9 trillion stimulus package proposed by Biden last week. This package will boost the economy and accelerate the spread of Covid vaccines. Now it’s up to Congress to pass the laws, ”he said.
“What happens when the cryptocurrency is no longer apolitical?”
However, as the divisive political drama that developed in the Trump era continues to unfold during the Biden era, everything previously viewed as non-partisan appears to be winning politically.
As a result, problems that were previously classified as largely “non-political” by both major parties in the US could become issues of contention in the future.
“The wild card is what happens when the cryptocurrency is no longer apolitical?” Wrote Monica Eaton-Cardone in an email to Finance Magnates. Monica is the owner, co-founder and managing director of Chargebacks911.
“Washington is as bitterly divided as it has been for generations, but at the moment cryptocurrency is mostly an apolitical concept. It just doesn’t polarize liberals and doesn’t get conservatives going as much as other issues. And because of this, it could escape political control.”
“The potential is certainly there as there is an obvious economic divide between crypto investors and most middle and lower-class Americans,” she said. “Not too many poor people or working-class mothers and fathers invest in bitcoins.”
“For better or worse, Joe Biden is a familiar crowd.”
Indeed, “Millions of Americans are unemployed and suffering while tech billionaires like Elon Musk and Jeff Bezos keep getting richer. It just doesn’t seem fair, does it? And since a democratically controlled White House and Congress will almost certainly be looking for new sources of income, the cryptocurrency market could be a very tempting political target. “
At the same time, however, Monica pointed out that “Joe Biden is a known great for better or for worse”.
“He has held an elected office longer than most alive Americans, and throughout his career as a lawmaker he has never been known as an outsider.” In fact, in 2020, Biden stood up as a consensus-building unifier in the middle of the road that will try to work with both sides. “
“Recent history suggests that unification will be unlikely, however: Presidents Trump, Obama and Bush failed to promote bipartisanism and instead spent huge political capital to sustain a very small number of legislative achievements.” , she said. “Since the turn of the century, US presidents have won by playing political hardball and not getting out of hand.”