President Biden issued an Executive Order in March 2022 directing government agencies to explore the risks and benefits in the crypto sector. For the last six months, various stakeholders across government, industry, and academia worked to advance the six key priorities outlined in the Executive Order. Based on their work, on September 16 the White House released its next installment, called a Framework for Responsible Development of Digital Assets. Key elements of the Framework include:
- Promoting private sector R&D for innovation,
- Directing regulators such as the SEC and CFTC to aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space, and for the CFPB and FTC to increase focus on monitoring customer complaints and enforcing unfair, deceptive or abusive practices,
- Promoting payments initiatives such as:
- Developing inclusive financial and payments services by encouraging adoption of instant payment systems like FedNow and Real Time Payments,
- Assessing the benefits of increasing regulation of nonbank payment providers, and
- Prioritizing efforts to improve efficiency of cross-border payments by aligning global payments practices,
- Establishing a standing forum with key stakeholders to exchange and share information designed to inform future actions,
- Reinforcing the US’s global financial leadership and competitiveness through:
- Messaging the US’s stance to global organizations such as the G7, G20, FATF, and others, and expanding its leadership roles in these organizations,
- Exploring how to assist developing countries build digital asset infrastructure and services, and
- Helping US FinTech & digital asset firms secure footholds in global markets, and
- Mitigating risk via explicit applicability of laws and penalties to the digital asset sector, such as:
- Potentially amending AML laws, anti-tipoff statutes and laws against unlicensed money transmitting to clarify their application to digital asset providers (including digital asset exchanges and NFT platforms),
- Identifying potential legal, regulatory and supervisory gaps through an illicit finance risk assessment on decentralized finance, and
- Increasing dialogue with the private sector to ensure information sharing is encouraged and private sector obligations are understood.
Why this matters. The Biden Administration continues to focus on digital asset regulation. Citing the marked growth in the digital asset space, and the resulting increased risks, the Framework encourages governmental agencies to work together to promote growth in a “responsible” manner. The Framework is a material, tangible step toward doing so. If implemented, it will significantly shape digital asset regulation in the US for years to come.
