In an interview with CNBC published Thursday, Eswar Prasad, professor of economics at Cornell University, shared his thoughts on U.S. President Joe Biden’s crypto executive order and what it means for the industry.
Prasad is the Nandlal P. Tolani senior professor of trade policy and professor of economics at the Charles H. Dyson School of Applied Economics and Management at Cornell University. He previously served as chief of the financial studies division in the International Monetary Fund (IMF)’s research department and head of the IMF’s China division.
The Cornell professor has repeatedly warned about the risks cryptocurrency poses to monetary and financial stability. In December last year, he said Bitcoin may not last much longer.
President Biden issued an executive order on the regulation of cryptocurrencies Wednesday. The professor explained that the executive order basically “tasks various U.S. agencies and institutions” to come up with a “comprehensive plan for the regulation of a broad set of digital assets, including decentralized cryptocurrencies such as bitcoin, but in addition, stablecoins. It also explores the prospect of launching a digital version of the U.S. dollar.
The professor added:
In all of these areas, I think regulation is certainly necessary because it is a bit of a Wild West right now. You have a lot of prospects for decentralization and the prospects of these new technologies potentially democratizing finance.
However, Prasad noted: “But, on the other hand, there is a risk that these technologies could be used for illicit financing. They could end up not providing the sort of investor protection that is necessary to make sure that retail investors understand the risks of what they’re getting into.”
Moreover, the professor detailed: “You have financial stability risk as well, including from stable coins, which might seem like the safest of instruments but are beginning to essentially function like unregulated money market mutual funds.”
Noting that “the idea behind the [executive] order is to start thinking about the functionality of these different assets and technologies and thereby regulate them,” the Cornell professor said:
Actually, it might end up benefiting the industry … Because ultimately what these sorts of regulations provide to the industry is legitimacy.
Prasad noted that when the specifics of the regulation come out, the crypto industry may not like some parts of it but overall he insisted that it should be positive for the industry.
Nonetheless, he concluded:
Overall, bringing some regulatory clarity certainly is going to help the industry and potentially could also help harness the benefits of these new technologies by mitigating the risks.
Many people in the crypto sector are encouraged by Biden’s crypto executive order. “This is an affirmation that crypto is here to stay,” a crypto company’s executive described.
