In the last couple of weeks, everybody was expecting the executive order from President Biden. It was clear from the beginning that he would try to unify US efforts to regulate the crypto market. But then again it brought a lot of uncertainty regarding its content.
It was finally released yesterday and has caused quite a stir with Bitcoin losing all its gains in just one day. Why did that happen and what is Bidens executive order all about?
Yellen’s statement came too early
Before the executive order was released yesterday, a statement from US treasury secretary Yellen caused the market to rally. Yellen commented positive remarks on the executive order which probably raised the expectations of investors.
The clue is, that the order itself was not published when that statement was released. It was pulled very quickly from the department of treasury’s website, but an archived version went viral within minutes.
Even though the content of the executive order was unknown, it led to the belief that there will be no harsh regulation. In the light of the war in Ukraine, many analysts feared that the US could turn against crypto to prevent Russian oligarchs from circumventing sanctions.
Nothing new, nothing special
That was indeed not the case. Only hours later the executive order was released and it confirmed that the United States would not change its stance on cryptocurrencies. But why is the market reacting again?
Within hours after the release Bitcoin started tanking. And alongside BTC the rest of the market also took a dive. The executive order is heavily focused on CBDC and the question of how to develop such a technology and if a CBDC makes sense in the first place. There is not a single line that is introducing a new policy regarding crypto.
That might have caused uncertainty among investors since many regulatory aspects are believed to need an overhaul. As the case between Ripple and the SEC shows, there are policies that are unclear or at least don’t seem to be sound if applied to a cryptocurrency or a company active in this particular industry.
Environmental concerns regarding PoW
Proof of work is the oldest consensus model which was introduced by Bitcoin. Most Bitcoiners are proud that the protocol remained untouched since its stability is considered to be an important feature.
But mining consumes a lot of energy and since the President of the United States is asking for a report that includes an assessment on the environmental impact including alternatives to this consensus mechanism, this is not looking good for Bitcoin.
While proof of work could indeed get in the way of US plans to mitigate climate change, it is worth mentioning that the order also revealed that the Biden administration is also looking into the benefits that mining can have in terms of using abundant energy that would otherwise go to waste. And even if the impact of proof of work would be considered negative, the US government is still looking into alternatives like proof of stake.
It seems that once more that all signs are clear that crypto is going to stay.