The Long-Awaited Executive Order

Written by: Chief Trust Officer, Kyle Pickner

March 9, 2022, was a historic day for cryptocurrency, traditional banking and financial services. President Biden signed an executive order to ensure the responsible development of digital assets.

What does this mean? The order focuses on six key areas — ensuring consumer and investor protection, maintaining financial stability, combating illicit financing activities, establishing U.S. leadership in the global financial system, and securing economic competitiveness, financial inclusion, and responsible innovation.

With the largest, most innovative economy in the world, the United States is starting to adopt formal regulation with regards to cryptocurrency. This will allow for further advancement from a regulatory perspective within the US in a safe and responsible manner. Banks are traditionally conservative, so it makes sense that they have been a quite hesitant when it comes to embracing the world of crypto. However, traditional finance and banking are changing right before our eyes. The last five years have defined the future of banking without borders as institutional and mainstream adoption of crypto has grown exponentially.

  • What is cryptocurrency anyway?
  • Why is this executive order important for traditional finance?
  • And how do we know it’s not just a fad?

To better understand crypto, we should first understand the history and evolution of money. Money has been around for thousands of years. From bartering for goods, to gold and silver, to physical currency and checks, and now to digital fiat currency. It has changed from what was once a clunky process now to a more streamlined way to pay for goods and services in a more efficient and cost-effective manner. Essentially, something needs to have the following characteristics to be considered money:

  1. Medium of exchange
  2. Unit of account
  3. Store of value

When you think about the evolution of money from using physical gold and silver coins to now being able to use ApplePay to buy anything from your phone, you can understand how much faster the exchange of money has become. However, that really only works when you have an intermediary such as a bank.

The Creation of Crypto

The creation of bitcoin as the first form of cryptocurrency in 2009 changed all that. Crypto is defined as a native asset of a blockchain network. Blockchain technology allows crypto to exist, and bitcoin allows for the transfer of monetary value without the need for an intermediary. Meaning, you do not need someone in between transferring or holding the funds for you. Think of it like being able to hold your own cash, but it’s digital.

It’s borderless and you can self-custody.

Present day: We’ve come full circle.

The greatest responsibility of a bank is the custody and safekeeping of customer’s assets. Even though you do not need an intermediary to hold your crypto, you really should have one. It’s the safest way to hold your assets and that custodian has a responsibility to you as a customer. Custodians in the crypto world have existed for the last few years, with companies such as BitGo, Gemini, Anchorage, and Paxos as state-chartered trust companies being able to custody digital assets for customers.

Now, banks and traditional financial institutions are diving in headfirst. State Street, one of the largest custodial banks in the world is now getting ready to hold cryptocurrency for customers. J.P. Morgan is getting involved in both crypto and the metaverse. Institutional and mainstream adoption is at an all-time high.

Millennials and Gen-Z make up a combined 163 million people in the U.S. These younger digital native individuals want faster, more cost-effective ways to store and move value around. Financial intermediation globally generates an estimated $5.5 trillion in revenue by servicing $300 trillion in assets. Banks now need to not just embrace the cryptocurrency revolution but understand that a generational shift is coming in the way of technology and finance.

If you want access to a bank that embraces technology and supports innovation, we’re happy to help.

This is intended for information purposes only.
These services are not insured by the FDIC and are not a deposit or other obligation of, or guaranteed by Plains Commerce Bank.


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