On March 9, President Biden issued an executive order on ensuring responsible development of digital assets. Here are some key points to remember:
- The order aims to secure the United States’ position as a leader in the rapidly growing blockchain and cryptocurrency industry while containing risk to consumers and the financial system itself.
- The long-awaited order pushes for a whole-of-government approach to cryptocurrency oversight and tasks various federal agencies with developing policy proposals on a range of topics, including a possible digital currency issued by the US central bank and regulatory safeguards proposed to protect consumers and respond to risks related to climate change.
- The order may lead to much-needed regulatory clarity regarding various classes of digital assets, as the order requires the Secretary of the Treasury to analyze the particular characteristics and risks of various types of digital assets and provide recommendations. to deal with these risks.
- The order calls on federal agencies to report on illicit financial activities conducted using digital assets and the risks posed to national security by criminal activities related to digital assets.
- Many hailed the order, saying it indicates Washington is becoming more comfortable with cryptocurrencies and offers the promise of greater regulatory clarity after a careful assessment of risks and opportunities within the industry.
The order recognizes the extraordinary growth of the digital asset market in recent years and the interest of the United States in being at the forefront of innovation in this area. The order underscores that the administration is interested in exploring ways in which the administration can strengthen U.S. leadership in the global financial system through digital asset technology. The order importantly recognizes that such technology can promote responsible financial innovation, expand access to safe and affordable financial services for the unbanked and underbanked, and reduce the cost of remittances and transfers. national and cross-border payments. It is therefore significant in that it signals that the United States will not seek to outright ban cryptocurrency technology. On the contrary, the order recognizes the vast untapped potential of this technology and the need for the United States to play a leadership role as society moves toward widespread adoption of this technology.
At the same time, the president acknowledged that this technology could pose risks to consumers, investors and businesses in the absence of key regulatory safeguards. The order emphasized that the administration’s primary policy goals are to protect consumers, investors and businesses and to mitigate the illicit financial and national security risks posed by the misuse of this technology.
To that end, President Biden has directed various agencies and departments to address key issues related to this technology and provide policy and regulatory recommendations by the end of the year. The order notably does not require an agency to adopt or implement any specific rules or regulations at this time. Rather, it takes the more modest and prudent step of calling for a series of reports that will allow the administration to develop a whole-of-government approach to capitalizing on this technology while mitigating the risks posed in the absence of regulatory safeguards.
Specifically, the order provides that the following actions must be taken within 90, 180 or 210 days to:
- Explore a US Central Bank Digital Currency (CBDC) by ordering:
- The Secretary of the Treasury is to submit a report on the future of currency and payment systems, including an analysis of the potential implications of a US CBDC for (i) economic growth and stability, (ii) inclusion financial, (iii) national security and (iv) financial crime and the risk that a CBDC could displace existing currencies and undermine the financial centrality of the United States.
- The Attorney General must submit a report assessing whether legislative changes would be required to issue a US CBDC and submit a legislative proposal based on consideration of the report submitted by the Secretary of the Treasury on the potential implications of a US CBDC.
- The Director of the Office of Science and Technology Policy and the United States Chief Technology Officer must submit a technical assessment of the technology infrastructure, capacity, and expertise needed to facilitate and support the introduction of a CBDC system, if applicable.
- Mitigate illicit finance and national security risks posed by criminal activities related to digital assets by ordering:
- The Attorney General is to submit a report on the role of national law enforcement in detecting, investigating and prosecuting criminal activity related to digital assets. The report should include recommendations on regulatory or legislative measures and on how to strengthen international law enforcement cooperation to detect, investigate and prosecute these criminal activities.
- Protect U.S. consumers, investors, and businesses as well as U.S. and global financial stability while promoting U.S. leadership in technology innovation by directing:
- The Secretary of the Treasury is to submit a report on the implications of the developments and adoption of digital assets and changes in the infrastructures of financial markets and payment systems for American consumers, investors, businesses and for economic growth fair. The order directs the secretary to address the conditions that would drive the mass adoption of different types of digital assets and the risks and opportunities such growth could present for U.S. consumers, investors, and businesses. The order also directs the report to include policy recommendations, including potential regulatory and legislative measures to protect consumers, investors and businesses and expand access to safe and affordable financial services.
- The Secretary of the Treasury is to submit a report outlining the specific financial stability risks and regulatory gaps posed by various types of digital assets, including the particular characteristics of various types of digital assets, and providing recommendations for addressing them. these risks, including additional or adjusted regulation and oversight, as well as new legislation.
- The Secretary of Commerce will establish a framework to improve U.S. economic competitiveness and leverage digital asset technology.
- Ensure the responsible development and use of digital assets in relation to climate change by leading:
- The Director of the Office of Science and Technology to submit a report on the links between distributed ledger technology and short, medium and long-term economic and energy transitions, the potential of these technologies to hinder or advance the climate change efforts at home and abroad, and the impacts of these technologies on the environment.
This order marks a promising next step toward regulatory clarity for U.S. businesses, which will enable greater innovation and participation in this burgeoning industry.