President Biden signed an Executive Order (EO) on Wednesday, March 9th ordering government agencies to coordinate their efforts to develop a regulatory plan for the cryptocurrency and digital asset sector.
According to the White House press release, the Executive Order on “Ensuring Responsible Development of Digital Assets” outlines the first whole-of-government strategy to address the risks and harness the potential benefits of digital assets and their underlying technology to help protect consumers, financial stability and national security, as well as to address climate risks associated with digital currency.
The initial reaction was mostly positive from those in the cryptocurrency space, who saw this as an official recognition of the popularity of cryptocurrencies. Bitcoin, one of the most recognized cryptocurrencies, saw a 9% jump following the announcement.
“I am pretty darn optimistic about it,” said Alexis Ohanian, Reddit co-founder and a major investor in crypto technology. “I’m grateful we’re at the point where the utility of this tech has proven to be very obvious to all levels of our government.”
While the overall reaction from the space was positive, there are those reserving their judgement, including Guy Gotslak, co-founder of My Digital Money, a popular cryptocurrency investment platform.
“The executive order is, more than anything, defensive," said Gotslak. "The main goals of the EO are to protect the US’ financial position globally, make sure US regulations are not circumvented using crypto, make sure crypto investors and users are protected legally, and that crypto as an industry is regulated in general."
The short answer is nothing... yet. The EO focuses primarily on research to better understand the potential impact of cryptocurrency and digital assets, and provides agencies defind time periods ranging from 60 to 120 days to develop policy recommendations on the six key topics listed below.
Protect U.S. Consumers, Investors, and Businesses
The EO directs the Department of the Treasury and other agency partners to assess and develop policy recommendations to address what the growing digital asset sector and changes in financial markets could mean for consumers, investors, businesses and how they could affect equitable economic growth. The Order also encourages regulators to ensure sufficient oversight and safeguard against any systemic financial risks posed by digital assets.
From the countless overnight investors claiming they were going to the moon with Doge during the pandemic to the Superbowl crypto exchange commercials (Coinbase anyone?) to Tom Brady’s FTX campaign, cryptocurrency is now mainstream – which means consumer protection was bound to be included in an order such as this.
Protect U.S. and Global Financial Stability and Mitigate Systemic Risk
The EO encourages the Financial Stability Oversight Council to identify and mitigate economy-wide (i.e., systemic) financial risks posed by digital assets and to develop appropriate policy recommendations to address any regulatory gaps.
Mitigate the Illicit Finance and National Security Risks Posed by the Illicit Use of Digital Assets
The EO directs an unprecedented focus of coordinated action across all relevant U.S. Government agencies to mitigate these risks. It also directs agencies to work with our allies and partners to ensure international frameworks, capabilities and partnerships are aligned and responsive to risks.
The inclusion of illicit finance activity in the order is not surprising, as cryptocurrency is a popular payment method for threat actors, specifically ransomware gangs. With the Biden Administration recently announcing the first ever sanctions against a cryptocurrency exchange on SUEX OTC for laundering cyber ransoms, illicit finance mitigation was bound to be included as a research point.
Promote U.S. Leadership in Technology and Economic Competitiveness to Reinforce U.S. Leadership in the Global Financial System
The EO directs the Department of Commerce to work across the U.S. Government in establishing a framework to drive U.S. competitiveness and leadership in digital asset technologies and to leverage them going forward This framework will serve as a foundation for agencies and integrate this as a priority into their policy, research and development and operational approaches to digital assets.
Promote Equitable Access to Safe and Affordable Financial Services
The EO affirms the critical need for safe, affordable and accessible financial services as a national interest that must inform our approach to digital asset innovation, including disparate impact risk. Such safe access is especially important for communities that have long had insufficient access to financial services.
The Secretary of the Treasury, working with all relevant agencies, will produce a report on the future of money and payment systems, to include implications for economic growth, financial growth and inclusion, national security and the extent to which technological innovation may influence that future.
Support Technological Advances and Ensure Responsible Development and Use of Digital Assets
The EO directs the U.S. Government to take concrete steps to study and support technological advances in the responsible development, design and implementation of digital asset systems while prioritizing privacy and security, combating illicit exploitation and reducing negative climate impacts.
Explore a U.S. Central Bank Digital Currency (CBDC)
The EO places urgency on research and development of a potential United States CBDC, should issuance be deemed in the national interest. The Order directs the U.S. Government to assess the technological infrastructure and capacity needs for a potential U.S. CBDC in a manner that protects Americans’ interests.
The Order also encourages the Federal Reserve to continue its research, development and assessment efforts for a U.S. CBDC, including development of a plan for broader U.S. Government action in support of their work. This effort prioritizes U.S. participation in multi-country experimentation and ensures U.S. leadership internationally to promote CBDC development that is consistent with U.S. priorities and democratic values.
The Executive Order on “Ensuring Responsible Development of Digital Assets” is the latest in a series of Executive Orders, legislation and memorandums from the Biden Administration that focuses on strengthening the nation’s cybersecurity.
The complete statement on the EO is available at www.whitehouse.gov/briefing-room/statements-releases/2022/03/09/fact-sheet-president-biden-to-sign-executive-order-on-ensuring-responsible-innovation-in-digital-assets/.
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