- The White House has published the first framework on regulating the digital assets space.
- It highlighted the need for protecting consumers, preventing crypto-related crime, and maintaining the country’s standing as a global financial powerhouse.
- It also shed further light on the government’s potential plans to launch a CBDC.
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The White House has indicated that it wants to protect consumers, fight financial crime, and look into launching a digital dollar.
White House Publishes Crypto Framework
The U.S. government is finally taking action to increase its regulatory oversight of the digital assets space.
The White House published the first ever crypto framework Friday, covering the key areas of the cryptocurrency space the Biden Administration wants to focus its attention on. The move follows President Biden’s executive order on “Ensuring Responsible Development of Digital Assets” signed in March.
“Together, we are laying the groundwork for a thoughtful, comprehensive approach to mitigating digital assets’ acute risks and—where proven—harnessing their benefits,” a joint statement from NEC Director Brian Deese and National Security Advisor Jake Sullivan said.
A White House statement detailed how multiple government agencies had come together and would seek to oversee the growth of the digital assets space with a focus on seven primary goals: protecting consumers and businesses, promoting access to financial services, fostering financial stability, supporting innovation, maintaining the country’s standing as a financial leader, fighting financial crime, and exploring the possibility of a digital dollar. In the statement, the White House explained how it would accomplish each of its objectives.
Protecting Consumers and Businesses
The White House noted the risks of crypto assets, citing price volatility and crypto scams. The statement encouraged the Securities and Exchange Commission and Commodity Futures Trading Commission to “aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space.” Though neither the SEC nor the CFTC has total oversight over the space today, the SEC has been keeping a particularly close eye on the crypto market, with the agency’s chair Gary Gensler reiterating this week that he believes most digital assets should be classed as securities.
The report also called for the Consumer Financial Protection Bureau and Federal Trade Commission to punish bad practices. Additionally, it said that government agencies should work together to address consumer risks and publish clear guidance and rules for the space. The Financial Literacy Education Commission would lead efforts to educate the public on crypto risks, it added.
Promoting Access to Financial Services
To make the digital economy accessible to everyone, the White House said that the government should focus on “supporting the development and use of innovative technologies by payment providers.”
Additionally, President Biden may establish a framework to regulate non-bank payment providers. The government also wants to improve the efficiency of borderless payments, saying agencies would “align global payments practices, regulations, and supervision protocols, while exploring new multilateral platforms that integrate instant payment systems.”
According to the statement, the National Science Foundation will work on ensuring digital assets are “usable, inclusive, equitable, and accessible” to everyone.
Fostering Financial Stability
The statement also drew attention to stablecoins, saying that the intertwining of digital assets and traditional finance services can have “spillover effects” and “disruptive runs.” It cited the collapse of Terra’s UST as proof of the “potential for instability.” Treasury Secretary Janet Yellen also commented on UST in the days following its implosion in May, noting that the incident highlighted the need for stablecoin regulation.
In a bid to support financial stability, the Treasury will work with financial institutions to identify risks and vulnerabilities, and collaborate with other agencies to “analyze emerging strategic risks.”
The report indicated that the government intends to promote innovation, and it outlined several steps to ensure the U.S. stays up to speed with the famously fast-moving crypto space. It said that the Office of Science and Technology Policy and NSF would conduct research on cryptography, “transaction programmability” (likely a reference to smart contracts running on blockchains like Ethereum), cybersecurity, privacy protection, and climate-friendly digital asset solutions.
The government has encouraged the Treasury and other agencies to provide guidance and assistance to U.S. companies working on new financial technology, while the Department of Energy, the Environmental Protection Agency has been tasked with monitoring how crypto impacts the environment. “Opportunities exist to align the development of digital assets with transitioning to a net-zero emissions economy and improving environmental justice,” the statement said.
Finally, the Department of Commerce will bring together federal agencies, academics, industry figureheads, and other parties to discuss how crypto could be regulated.
Keeping the U.S. at the Forefront of Global Finance
The White House reiterated that it wants to ensure the U.S. maintains its place as a global leader in finance. “The United States is working actively with its partners to set out [digital asset] policies in line with our goals and values, while also reinforcing the United States’ role in the global financial system,” the statement said.
As the Treasury explained in its recent framework on international engagement, the government will share “values related to digital assets” with international organizations such as G7, G20, and the Financial Action Task Force.
Additionally, the report said that the State Department and Department of Justice are set to increase collaboration with other agencies overseas, while the State Department, Treasury, USAID, and other agencies will work to help build digital asset infrastructure and services in developing countries.
The Department of Commerce will help crypto companies launch their products in global markets, the report added.
Fighting Financial Crime
The Administration has made it clear that it intends to combat all forms of crypto-related crime, pointing to digital asset use among the likes of Lazarus Group. The statement said that President Biden would weigh amending the Bank Secrecy Act and other laws to specifically establish rules for digital asset service providers, including NFT platforms. He will also consider urging Congress to increase the penalties for “unlicensed money transmitting” and amending laws to give the Department of Justice new powers to prosecute financial crimes in any jurisdiction.
The statement said that the government would continue to monitor crime in the sector, revealing that the Treasury would publish crime risk assessment guides on both DeFi and NFTs, respectively dropping in February 2023 and July 2023.
According to the statement, the government will work to expose bad actors and “identify nodes in the ecosystem that pose national security risks.”
Exploring a Digital Dollar
As Federal Reserve chair Jerome Powell has clarified on several occasions over the past year, the government is also considering launching its own Central Bank Digital Currency. The White House’s statement said that a digital dollar could offer “significant benefits,” including promoting financial inclusion and fostering economic growth.
It added that the government had developed “Policy Objectives for a U.S. CBDC System” reflecting its key priorities for a potential digital dollar. While the statement outlined priorities such as protecting customers, promoting economic growth, and respecting human rights, it said that the Federal Reserve would need to continue researching CBDCs. Moreover, the Treasury is set to lead a group focused on assessing the possible implications of a CBDC.
Crypto Briefing’s Take
The latest statement from the White House is the clearest sign yet that the government wants to support the growth of digital assets in a safe and secure way. While President Biden and the various agencies tied to the White House have been slow to act on crypto growth in the past, the recent moves show that the United States sees potential in crypto and blockchain technology. With the executive order signed in March, President Biden made it clear that he thought crypto was here to stay. Today’s statement shows that the government is busy working out how it will deal with digital assets as the technology moves toward mass adoption. With a clear focus on protecting customers, preventing crime, and the possible launch of a CBDC, it’s clear that the government wants to capture the opportunities that crypto can create while acknowledging the potential risks. In this sense, crypto regulation was always inevitable. That the U.S. is now taking the space seriously is only a positive sign for where things could head in the future.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.
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