The Great #DigitalCurrency Policy Race is ON

Reality is setting in for the digital currency community. Last week, the mood was all about relief -- if not flat out euphoria. The President of the United States issued an Executive Order which did NOT ban cryptocurrencies the way China did last year. He did trigger a great deal of policy formation activities, which is why we created a countdown clock for those initiatives on our Digital Currency Policy Volatility (DCVS page).

But, honestly, a ban on privately issued cryptocurrencies was never a likely outcome. We noted HERE just after Russia invaded Ukraine that the data pointed instead towards a more nuanced approach which balanced innovation and industry promotion with the law enforcement issues.

This is what we said on March 2:

"Western regulatory policy officials will become increasingly active seeking to shut down illicit activity in this sector of course. Leaks to AP news indeed indicate that the cryptocurrency backdoor for sanctions evasion is on the White House radar screen: "The Biden administration is working on a “focused tactical strategy” to make certain that cryptocurrency doesn’t become a mechanism that Moscow is able to utilize to avert sanctions, according to a senior administration official." The growing dominance of the United States in mining and trading cryptocurrencies will create other incentives for US policymakers to favor home-grown initiatives."

With the United States actively competing with Russia on hashing activities and with the venerable JPMorgan as a stablecoin issuer, shutting down the industry was not a real risk. And as we noted in 2020 HERE and again during 2021 HERE, the United States, United Kingdom and and the European Union have been steadily working towards promoting a range of public/private partnerships and sovereign digital currency issuance that works with the grain of the markets.

Cynics in Washington may dismiss the Executive Order because it consists mostly of mandated reports to the White House.

And since financial regulators operate with a fair measure of political independence, the Executive Order has limited capacity to require compliance by financial regulators.

But the breadth of coverage and policy activity indicates that a much broader range of policymakers will now have formal and influential roles that extend well beyond financial regulation and law enforcement. In addition, the process of preparing all those reports to the President will trigger a range of other regulatory and policy activity.

The policy landscape will now turn quiet for a few weeks. Media attention will spike during the meetings noted above and, of course, when the various reports are published.

Market participants should not confuse the media coverage with randomness in the policy process.

Tracking and measuring technical moves now using our patented process makes it possible to anticipate market reaction functions later, when the reports are released.

Consequently, we have created countdown timers on our digital currency page.

We know that headline risk and market reaction functions will spike as these clocks wind down. Our alternative data users for DCVS 1 (Cryptocurrency and DCVS 2 (CBDC) policy and our Bloomberg Terminal App customers will spot momentum spiking long before the clocks hit zero. They will buy the fact and sell the news, reaping alpha gains and smarter beta management along the way.

To learn more or to fast-track your access to the data, reach out to us today.


About BCMstrategy, Inc.: The company helps portfolio managers and strategists anticipate market volatility related to public policy/headline risk by delivering quantitative volume-based objective data drawn directly from the public policy process paired with data generated from media coverage from fact-checked journalism publishers like Dow Jones and ThomsonReuters. The full data set is available exclusively through the Bloomberg Enterprise Access Point. Volatility signals related to cryptocurrency policy, CBDC policy, climate finance policy, and monetary policy are available via API. Charts, graphs, and verbal data are available through the V3 PolicyScope Data app on the Bloomberg Terminal at: {APPS PLCY <GO>}.