Officials within the Biden administration are reportedly studying “gaps” in cryptocurrency regulations following the latest bout of volatility in the market, sending a signal that new rules could soon be proposed.
People familiar with the matter informed The Washington Post that White House officials are studying whether digital assets like Bitcoin (BTC) can be used to finance terrorist activities. They are also mulling whether retail investors should be protected from the extreme price fluctuations of digital asset markets.
Bitcoin’s brief collapse below $30,000 last week triggered a panic wave of selling, as digital asset markets shed over $1 trillion in value in just ten days. Peak to trough, the digital asset market was nearly cut in half between mid-April and mid-May.
A new proposal from the United States Treasury that would require cryptocurrency holders to report all transfers above $10,000 to the Internal Revenue Agency was one of many catalysts behind the decline. The Biden administration’s plan to double the IRS’ workforce over the next decade was also a source of worry among investors who feel that the United States is quickly losing its competitiveness on matters related to taxation and digital asset markets.
At present, federal lawmakers do not believe that wild swings in crypto prices can threaten broader financial-market stability, The Washington Post claimed, although the risks are worth monitoring. “They’re aware of the fact that there are all kinds of risks in the abstract and things to look out for, but they are still largely in a wait-and-see posture,” the anonymous source said.
At its peak, the cryptocurrency market was collectively valued at over $2.5 trillion, which is tiny in comparison to the broader financial system. However, as crypto continues to grow, what the government deems to be an acceptable risk may change.