Biden administration is reviewing "gaps" in cryptocurrency regulation and may propose new rules

Officials within the Biden administration are reportedly examining “gaps” in cryptocurrency regulation following the latest bout of market volatility, sending a signal that the administration could soon propose new rules.

White House officials are studying whether digital assets such as Bitcoin can be used to finance terrorist activities, people familiar with the matter told The Washington Post. They are also considering whether retail investors should be protected from extreme price fluctuations in the digital asset market.

Last week, the price of Bitcoin fell below $30,000, triggering a wave of panic selling, and the digital asset market's market value plummeted by more than $1 trillion in just 10 days. From peak to trough, the Bitcoin market lost almost half of its value between mid-April and mid-May.

A new proposal from the U.S. Treasury Department that would require cryptocurrency holders to report all transfers over $10,000 to the IRS is one of many factors contributing to Bitcoin's decline. The Biden administration's plan to double the number of IRS employees over the next decade is also worrying investors who feel the U.S. is quickly losing competitiveness on matters related to taxation and the digital asset market.

The Washington Post said that at present, federal lawmakers do not believe that the sharp fluctuations in cryptocurrency prices will threaten the stability of broader financial markets, although such risks are worth monitoring. The anonymous source said, "They realize that there are various risks in theory and that there are things to pay attention to, but they are basically still on the sidelines."

At its peak, the total market value of the cryptocurrency market exceeded $2.5 trillion, which is insignificant compared to the broader financial system. However, as cryptocurrencies continue to grow, what the Biden administration considers acceptable risks may change.