The Biden administration wants to increase oversight of cryptocurrencies to protect investors and prevent illegal transactions

The Biden administration, lawmakers and central bank governors have held multiple meetings amid recent volatility in cryptocurrency markets, The Washington Post reported on Tuesday.

The publication, citing two people familiar with the matter, said the Treasury Department briefed White House officials earlier this month on the risks posed by cryptocurrencies. Federal regulators, including the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB), also participated.

Officials in the Biden administration are examining potential “gaps” in oversight related to the cryptocurrency markets, these people said, such as whether cryptocurrencies could be used to finance illegal or terrorist activity.

They also discussed whether some protections need to be provided to ordinary retail investors who buy cryptocurrencies.

The Treasury Department recently unveiled Biden’s tax proposals, including requiring businesses to report cryptocurrency transactions over $10,000 to the Internal Revenue Service (IRS) as part of a broader effort to combat tax evasion.

Federal regulators do not currently view volatility in cryptocurrency markets as a threat to broader financial market stability, but believe the risk is worth monitoring.

Government officials are discussing whether they can increase oversight of cryptocurrencies while still allowing investors to “use Dogecoin to their heart’s content,” one person familiar with the matter said.

“They realize there are all sorts of abstract risks and things to be aware of, but they’re still largely on the sidelines.”

Meanwhile, central bank officials and congressional lawmakers are talking more frequently about policies that could significantly change the cryptocurrency market. The House of Representatives has passed bipartisan legislation, which has been sent to the Senate, directing federal regulators to study and clarify the rules for cryptocurrencies. Bitcoin News reported on Wednesday that federal regulators are working together to achieve this goal. According to Randal Quarles, vice chairman of the Federal Reserve's supervision department, the matter is a "high priority."

Recent market instability has exacerbated existing concerns about cryptocurrencies, including the environmental impact of bitcoin mining. Government officials also argue that cryptocurrencies make it easier for criminals to move money without being detected.

The news quoted Jason Furman, a senior economist in the Obama administration, as saying:

“I wish we had nipped this in the bud 10 years ago before it grew into a $2 trillion monster. Cryptocurrencies are only bad and no good — environmental, crime, volatility, taking advantage of uninformed investors. If they had any use, we’d discuss it. But they have no use.”

Meanwhile, the new chairman of the U.S. Securities and Exchange Commission (SEC) said that more investor protection is needed and that cryptocurrency exchanges need more regulation. He revealed last week that he has asked Congress to weigh in on the issue. However, Congressman Jim Himes said that Congress is not ready to act on cryptocurrencies, and in his opinion, no crypto registration will be passed by Congress anytime soon.

John Fagan, former director of the U.S. Treasury Department's Markets Office and now head of Market Policy Partners, said the Biden administration is likely to focus on problems caused by money laundering, tax evasion and investor protection when studying cryptocurrencies. He expects the Treasury Department to focus on the first two issues, while the U.S. Securities and Exchange Commission will focus on the latter.