Biden Administration releases its first-ever framework for crypto regulation in the U.S.
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(Kitco News) - The White House has released the first-ever framework for crypto regulation in the U.S. in response to President Biden’s recent executive order on Ensuring Responsible Development of Digital Assets.
Included in the framework are seven sections that lay out the ways in which the financial services industry needs to evolve to help facilitate borderless transactions and eliminate fraud in the digital asset space.
The seven sections included in the published fact sheet include: (1) Protecting Consumers, Investors, and Businesses; (2) Promoting Access to Safe, Affordable Financial Services; (3) Fostering Financial Stability; (4) Advancing Responsible Innovation; (5) Reinforcing Our Global Financial Leadership and Competitiveness; (6) Fighting Illicit Finance; (7) Exploring a U.S. Central Bank Digital Currency (CBDC).
Much of the information contained in the release is well-known and simply reiterated the policies and principles that the White House has been focused on. This includes giving the Securities and Exchange Commission and Commodity Futures Trading Commission the directive to “aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space.”
Unfortunately, the report failed to further tease out the segregation duties between the SEC and CFTC, which is a pressing matter that remains an area of contention and confusion.
To promote safe and affordable access to financial services, agencies “will encourage the adoption of instant payment systems, like FedNow,” and support their use by utilizing these services for agency transactions, where appropriate. The President will also consider any recommendations “to create a federal framework to regulate nonbank payment providers.”
In order to foster responsible digital asset innovation, the Office of Science and Technology Policy (OSTP) and the National Science Foundation (NSF) have been tasked with developing a Digital Assets Research and Development Agenda.
The agenda will be used to jumpstart important research in the fields of next-generation cryptography, transaction programmability, cybersecurity and privacy protections, and ways to mitigate the environmental impacts of digital assets.
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On the environmental front, the Department of Energy, the Environmental Protection Agency, and other agencies have also been instructed to continue tracking environmental impacts, develop performance standards, and provide local authorities with the tools and resources needed to mitigate any environmental damages.
“Opportunities exist to align the development of digital assets with transitioning to a net-zero emissions economy and improving environmental justice,” the report said.
Some of the security strategies laid out by the White House include amendments to the Bank Secrecy Act, anti-tip-off statutes, and laws against unlicensed money transmitting to apply explicitly to digital asset service providers, including exchanges and nonfungible token platforms.
On the topic of a U.S. central bank digital currency (CBDC), the report revealed that the administration has already developed policy objectives for a U.S. CBDC system that “reflects the federal government’s priorities for a potential U.S. CBDC.”
“A U.S. CBDC system, if implemented, should protect consumers, promote economic growth, improve payment systems, provide interoperability with other platforms, advance financial inclusion, protect national security, respect human rights, and align with democratic values.”
As it stands now, further research and development on the technology that will support the future digital dollar is needed, and the White House has encouraged the Federal Reserve to continue its ongoing CBDC research, experimentation and evaluation.
To help achieve this, the Treasury has been tasked with leading an interagency working group “to consider the potential implications of a U.S. CBDC, leverage cross-government technical expertise, and share information with partners.”
Included in the working group will be the leadership of the Federal Reserve, the National Economic Council, the National Security Council, the Office of Science and Technology Policy, and the Treasury Department.