North Korea, fraud, and financial losses are some of the dangers emanating from the cryptocurrency industry, according to a White House blog post published on Jan. 27. It argued for enhanced oversight of cryptocurrencies more broadly, requesting help from financial regulatory bodies and congressional lawmakers.
The blog—co-written by national security adviser Jake Sullivan, National Economic Council Director Brian Deese, Office of Science and Technology Policy Director Arati Prabhakar, and Council of Economic Advisors Chair Cecilia Rouse—outlined the administration’s strategy for mitigating the risks associated with cryptocurrencies.
The White House officials described digital assets as a nascent industry with promise but one that must be reined in for the sake of consumers. Sullivan has long been sounding the alarm with respect to cryptocurrencies, which he placed on the administration’s radar in June 2021 following the highly publicized ransomware attack on the Colonial Pipeline.
The White House pointed to North Korea to justify the need for further legislation, highlighting that a lack of security protocols allowed North Korea to “steal over a billion dollars to fund its aggressive missile program.” This refers to allegations by South Korea’s main spy agency that their northern neighbor employed state-sponsored hackers to extract $1.2 billion from various digital asset projects.
White House national security adviser Jake Sullivan speaks at a press briefing at the White House on Dec. 12, 2022. Kevin Lamarque/Reuters
“Privacy coins”—cryptocurrencies that algorithmically “wash” transactions to obfuscate their ownership history—appear to be in the sights of the Biden administration as well. The briefing linked to a 2022 report (pdf) that listed privacy coins under the “Malicious Acts” section of the report, mentioning that such tokens are the preferred medium of exchange for criminals and bad actors.
Proponents of the popular privacy coin Monero view the ability to transact with anonymity as one of the core tenets underpinning the crypto movement.
The White House urged Congress to pass new laws to help curb criminal activity in the digital asset space. Suggestions included steeper penalties for illicit financial affiliations and additional transparency requirements for crypto-related companies.
A push to partner with international lawmakers was a key focus of the blog as well. Many have blamed foreign nations with lax legal frameworks for facilitating much of the fraud in the space.
“These foreign exchanges have virtually no regulation,” macroeconomic strategist Jim Bianco said in an interview with Wealthion.
However, Bianco recognized the risk that regulators may become co-opted by the companies they’re intended to regulate, using FTX founder Sam Bankman-Fried as an example.
“A lot of people in the industry were very uncomfortable with him because they didn’t think he represented the best interests of the industry,” he said. “He was going to use his vision of regulation to build a moat around FTX.”
Urging caution in regulation was a theme in the blog as well. White House officials warned that laws incentivizing further investment into crypto should be avoided.
“Legislation should not greenlight mainstream institutions, like pension funds, to dive headlong into cryptocurrency markets,” the blog reads. “It would be a grave mistake to enact legislation that reverses course and deepens the ties between cryptocurrencies and the broader financial system.”
At least 15 state and municipal pension funds suffered losses in the FTX implosion in the fall of 2022, according to the retirement planning website Equable. The Ontario Teachers’ Pension Plan lost a $95 million investment in the failed crypto exchange.
Another Canadian pension fund lost $150 million by investing in the now-defunct crypto network Celsius, which filed for bankruptcy in July 2022.
But some economists think regulation would do little to protect investors and would place an unnecessary burden on taxpayers.
“We don’t need more government regulation,” Peter Schiff, chief economist at Euro Pacific Asset Management, told The Epoch Times. “We need more free market regulation and personal responsibility.”
